Why this deal will KILL NI businesses


This deal is not just burdensome for NI Businesses, it is disastrous and puts us at a severe disadvantage to both UK (mainland) businesses and EU businesses. Going forward, NI businesses need to decide whether they trade WITH UK or EU, it will be almost impossible to do both.

Why?

Well, let's take some examples to explain what I mean.
1. Let's take something like an Irish Linen manufacturer trying to sell to a retail chain in the UK, competing with a UK linen manufacturer. The goods are all made in the UK, so should be no issues right? Erm nope. Flax is not produced in NI, it's mainly bought in from Holland and cotton thread is mainly bought in from England. So if the NI manufacturer sells to both the EU and UK, it now has to pay customs duty on it's UK imports of cotton thread. It MAY get them refunded, but to do this it has to track every single sale and prove it's cotton has not ended up in Europe. Clearly, it has. So it has a huge admin burden which is costly.

WORSE
It competes with a rival mainland manufacturer for a contract with a UK retail chain. They both import flax to make the linen. Mainland manufacturer pays at the raw level, a tiny fraction of the cost. So overall, it's price goes up by a tiny %. NI manufacturer can import the flax duty-free, however, has to pay import duty on the cotton from the UK (it can claim this back once it proves it has not entered into Europe - but a huge cash flow burden). Further, when it sells to the UK chain, it has the huge admin burden of filling in export forms to the UK. Also, the UK retail chain will have to pay import duties on the value of the finished goods (including shipping), so the landed cost is MUCH higher, an absolute disadvantage to the NI manufacturer. The ONLY way for the manufacturer to avoid this is to stop doing EU sales and be a UK retailer only and pay the import on the flax. So companies in NI must choose to sell to the UK or EU, the burden and much higher costs mean they cannot competitively do both.

Let's take another example, a small retailer based in NI which buys from UK/Europe and sells to UK/ROI customers. The huge burdens placed on this and small retailer means it will be impossible to continue selling to both markets, they have to choose one. Why? Again let's play through the different scenarios and see.

1. NI shop buys German toy for £10 and sells to both ROI & UK for £20. UK shop buys German toy and sells to UK. NI shop pays no import duty as within the EU customs area. On sales to ROI customers, all easy and frictionless. UK shop pays import duty, let's say 20% on the raw cost. The landed cost to the UK shop is £12, it now sells at say, £24. On the face of it, this looks like a competitive advantage to the NI shop. However, dig deeper and you see it's a huge disadvantage. UK customer comes along and looks at NI shop selling at £20, and the UK shop selling at £24. Bargain goes for NI shop. However, customs forms need to be filled in by NI shop (apparently these take 1 ¾ hour per return, according to recent reports by Govt.). So for every sale, the small business in NI needs to fill out these forms. WORSE. When the end retailer gets the sale, they get a lovely customs bill. This will be 20% on the sale price + shipping. So say shipping was £3. The customs are now (£20 + £3) x 20% = so the final price to the customer, who was expecting to pay £20 is £20 + £7.60 tax. WORSE. Every single agency importing goods to the UK charge admin processing fees, from £11 for Royal mail to up to £35 from couriers. So the UK customer is left with a total bill of between £38.60 and £62.60 when they thought they were getting a bargain at £20. The huge public backlash which undoubtedly come will mean people in the UK will just NOT buy from ANY Ni business, just in case they get hit with these tariffs they were not expecting. So the NI business has to make a choice, trade with UK or EU but doing both leaves them open to such a huge unlevel playing field, they will be out of business very quickly. AND all NI businesses will soon be avoided once people get the perception that they may be left with hefty customs charges and it won’t be clear on what and from whom, as they won’t know where that NI business has imported from and if it sells to both EU and NI. Note, the UK business can ship to NI customers easily and without friction or the burden and huge admin costs the NI businesses face.

So the best of both worlds? Or an absolute calamity about to hit NI businesses that people are just not understanding. Far from encouraging people to invest in NI, people will run. Right now I need to decide whether to close down my business in NI and move to the UK or just to stop all UK sales completely.

Further, NI is built on tiny, small businesses. All of those will suddenly, need to become customs experts. They will be deemed the importers and they will be responsible for ensuring the goods meet all the regulations in all countries they sell in, or they are liable as the importers. Right now that is not an issue as the regulations are aligned. But as the UK diverges and tries to do a US deal, our regulations will drop in order to attract American companies, and it will be the small NI business that will need to be an expert in all the different regulations!

@beltel @Femi_Sorry @mrjamesob @duponline @peston

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