Published: 1 March 2023
Has Sunak Solved the Northern Ireland Brexit Conundrum?
Share this page
Political Science historians will argue, in decades to come, about the creation of the Northern Ireland Protocol and its role in the UK’s withdrawal agreement with the EU. All parties agreed that preventing a hard physical border on the island of Ireland was important but whether that meant that treating Northern Ireland differently to the rest of the UK was inevitable, as Mrs. May agreed early on in the negotiations (and Boris Johnson accepted as the price for getting Brexit done), will be the subject for countless doctoral theses and plenty of books. By-products of the protocol have included costly trade frictions for businesses moving goods from mainland UK into Northern Ireland, the collapse of the governing power sharing agreement and, in our world, an implied reason for the lack of serious trade talks between the US and the UK.
It should be no surprise therefore that we have welcomed the agreement, painstakingly negotiated between the UK and EU, which seeks to resolve the worst of the problems associated with the Protocol. The Windsor Framework will allow goods destined for sale in Northern Ireland to be sent there as if to any other part of the UK, returns sovereignty over issues like VAT and duty back to the UK government and gives the local devolved administration the chance to object to any future EU regulations that it feels will materially and seriously impact citizens. No doubt, there will be forensic examination of the exact legal mechanics of this ‘Stormont Brake’ in the coming days but this is a deal that should be taken.
There has never been any overt connection made by the US administration between EU/UK friction over Northern Ireland and the trade discussions with the UK but it certainly didn’t help. Solving this problem, if the Windsor Framework survives the political examination, will give the UK government another chance to talk to the US about opening serious trade negotiations this year. But we shouldn’t hold our breath; trade continues to be well down the list of priorities for the Biden administration and as focus turns inevitably to the next presidential cycle, it feels unlikely that they will want to change the narrative. All of the big spending bills of the last two years, the Chips and Science Act, the Infrastructure Act and the Inflation Reduction Act have some element of America First thinking built into them and this will form part of the basis for the re-election campaign. I hope I am wrong, but I suspect that any serious US–UK trade negotiations will probably need to wait until after the 2024 election.
If Rishi Sunak is able to get this done, it will be a significant success and we hope that he will then use the momentum that this will give him to look hard again at the overall competitiveness of the UK for international investment and especially at the net level of corporation tax that companies will be expected to pay from April. A number of CEOs of BAB member companies have raised the issue publicly and we will continue to make the point that, over time, tax is a critical factor in investment location decisions. The UK is planning to raise the headline rate of Corporation Tax from 19% to 25% in April and, at the same time, remove the Capital Investment Super Deduction, an incentive for investing in capital projects and equipment. Contrast this with the federal rate of Corporation Tax in the US of 21% and the raft of investment incentives in the US Bills mentioned above and there is clear divergence in strategy which companies are seeing and will look to take advantage of.
We will be talking about tax, trade, geopolitics and the details of doing business across the Atlantic in a series of events over the coming months and there are sessions relevant to every size of business and interest area. Keep an eye on the events page of our website for details or talk to the BAB membership team about ways you can get involved…there is plenty to talk about!