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June 14, 2022

Food industry calls for dialogue amid Northern Ireland protocol row

“The protocol needs reform, but it doesn't need a wrecking ball” – Manufacturing NI CEO Stephen Kelly

By Simon Harvey

Calls for dialogue have echoed through the food industry to greet the UK government’s proposals to override parts of the Northern Ireland Protocol, with the stage set for a drawn-out legal process with the EU.

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The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
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The UK has tabled plans for airport-style green and red channels to differentiate between goods from Great Britain destined for use in Northern Ireland and shipments bound for onward transportation into Ireland, an EU member state.

Liz Truss, the UK Foreign Secretary, said the proposals would “remove unnecessary costs and paperwork for businesses trading within the UK, while ensuring full checks are done for goods entering the EU”.

In focus now is the so-called ‘doctrine of necessity’ on which the UK has hung its legal case after months of negotiations with the EU to find a mutually agreeable compromise post the Brexit settlement agreement signed off by both parties in January 2020.

The EU has made good on its promise to reinstate legal action against the UK government.

“It is with significant concern that we take note of [the] decision by the UK government to table legislation disapplying core elements of the protocol. Unilateral action is damaging to mutual trust,” European Commission Vice President Maroš Šefčovič said.

He added: “As a first step, the Commission will consider continuing the infringement procedure launched against the UK government in March 2021. We had put this legal action on hold in September 2021 in a spirit of constructive cooperation to create the space to look for joint solutions. The UK’s unilateral action goes directly against this spirit.”

The existing trade arrangements under the protocol, which keeps Northern Ireland within the EU to prevent a hard border with its Republic neighbour – creating a trade border with the UK in the Irish Sea – has been criticised by some for causing extra costs and delays.

However, the new proposals presented to Parliament have now raised widespread concerns over further disruption to trade, including from the Northern Ireland Food and Drink Association (NIFDA) and Manufacturing NI, with negotiation thrust forward as the most viable solution.

“NIFDA supports the Northern Ireland Protocol and believes it has largely given businesses here that certainty, solving many of the challenges that Brexit posed to Northern Ireland food and drink businesses,” Michael Bell, the industry body’s executive director, said in a statement. “This is the beginning of the legislative process, but the only path to a long term, durable solution is through negotiation, and identifying practical solutions to address the remaining issues that the protocol presents.”

Stephen Kelly, the CEO of Manufacturing NI in Portadown, told the BBC the existing protocol is “working pretty well for the manufacturing community”, noting exports to Ireland were up 60% last year and 37% in the first quarter.

Speaking before the leaked announcement became official yesterday, Kelly said: “There are challenges on the Irish Sea, there are challenges with the supply chain from Great Britain into Northern Ireland but the economic reality for manufacturers here, for food processors and many other parts of the economy, is that the protocol works incredibly well. And the protocol needs reform but it doesn’t need a wrecking ball. And what’s been proposed potentially is just that.”

The UK government claims the so-called Northern Ireland Protocol Bill will “address the practical problems” in four areas, described as “burdensome customs processes, inflexible regulation, tax and spend discrepancies and democratic governance issues”, namely disagreement among the Unionists and DUP over the protocol.

“They are undermining all three strands of the Belfast (Good Friday) Agreement and have led to the collapse of the power-sharing arrangements at Stormont. The UK government is committed to seeing these institutions back up and running so that they can deliver for the people of Northern Ireland,” a government statement read.

Stuart Anderson, the head of public affairs at the Northern Ireland Chamber of Commerce, also urged a recommencement of UK and EU talks, as Commission vice president Šefčovič prepares to consult with the European Parliament and member states.

However, Šefčovič said “renegotiating the protocol is unrealistic”, adding “no workable alternative solution has been found to this delicate, long-negotiated balance”.

Anderson put forward his view: “While there are attractive elements in today’s proposals for consumer-facing businesses, in particular, a careful balance must be struck to protect gains made to date by our exporters and agri-food sub-sectors. The apparent shifting of risk onto NI businesses is a cause for particular concern.

“As our businesses fight the challenge of soaring inflation, it is incumbent on the EU and the UK to recommence discussions without any further delay.”

Defending its legal standing on the new proposals, the UK government cites the doctrine of necessity, which it says “provides a clear basis in international law to justify the non-performance of international obligations under certain exceptional and limited conditions”.

Foreign Secretary Truss stood her corner: “This is a reasonable, practical solution to the problems facing Northern Ireland. It will safeguard the EU single market and ensure there is no hard border on the island of Ireland.”

She added: “We are ready to deliver this through talks with the EU. But we can only make progress through negotiations if the EU are willing to change the protocol itself – at the moment they aren’t.”

Truss’s and Šefčovič’s comments suggest a drawn-out period of political stalemate, while the protocol proposals still need to be approved by the UK Parliament.

Across the Irish Sea, Karen Betts, the CEO of the UK’s Food and Drink Federation, acknowledged the existing protocol arrangements have drawbacks but echoed her industry counterparts’ pleas for constructive dialogue.

“The situation for moving food and drink to and from Northern Ireland remains difficult for our industry, given that the current arrangements continue to drive cost and complexity into our ability to move goods around within the UK,” Betts said.

“We continue to urge the UK government and the EU to redouble their efforts to find mutually acceptable solutions to the impasse and to work closely with industry on both sides of the border in doing so.

“There are pragmatic, business-friendly ways of addressing the problem, which we think deserve more consideration than is currently the case, that would allow the smoother movement of goods and so protect essential trade between Great Britain and Northern Ireland, while recognising the high standards of UK food and drink.”

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Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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