Windsor Framework Review Challenges and Opportunities

The Northern Ireland issue was one of the trickiest dilemmas in the post-Brexit arrangements, one that even five years later is experiencing friction. Of course, as part of the UK, Northern Ireland is no longer a part of the EU and should therefore be subject to the same customs controls as the rest of the UK at the EU border. But, as a result of the Good Friday Agreement, which brought an end to years of conflict, it is vital that a free border remains between Northern Ireland and the Republic of Ireland, which means an open border between the UK and EU. Hence the tricky dilemma.

Boris Johnson’s solution, when he was Prime Minister, was the Northern Ireland Protocol, which allowed that Northern Ireland-Republic of Ireland border to stay open but led to certain checks on goods travelling between Northern Ireland and Great Britain. Whilst providing a temporary quick fix, this arrangement resulted in higher levels of red tape, trade disruption and political tension from those who felt there should not be trade barriers between companies operating in the same country as each other. Many citizens in Northern Ireland were particularly critical that there was a hard border in the Irish Sea.

Fast-forward through a couple of years of escalating tension and stalemate style negotiations between the UK and the EU, a new and improved solution was found – the Windsor Framework. Mr Sunak sold the deal with gusto, proclaiming that the framework made Northern Ireland “the world’s most exciting economic zone.” The framework addresses some of the practical issues that arose due to the Northern Ireland Protocol. One of the key reforms puts in place is a green lane and red lane for UK goods entering Northern Ireland. The green lane is for goods staying in Northern Ireland, with minimal checks and paperwork and a not-for-EU label. The red lane is for goods heading into the EU via Northern Ireland, requiring full EU customs checks and regulatory compliance.

The Windsor Framework has been in operation since 1^st October 2023, with some aspects having been phased in throughout 2024. Certain labelling requirements have also been delayed to attempt to reduce the logistical burden for businesses. During this time, the Windsor Framework has helped to ease some of the administrative pressures on Northern Ireland-GB trade. However, it’s not perfect, and there are teething problems that still need examining.

Introducing Lord Murphy of Torfaen, previous Secretary of State for Northern Ireland, MP for Torfaen in Wales until 2015, and now a member of the House of Lords. He has initiated an independent review, seeking input from relevant stakeholders on the functioning of the Windsor Framework and its implications for social, economic and political life in Northern Ireland, and on the UK internal market, including any recommendations. We were glad to have been able to feed into this review in Belfast last week:

What are the issues?

IoD members in both Northern Ireland and Great Britain have stated they are experiencing greater levels of bureaucracy when doing business with and in Northern Ireland. If their goods are travelling down the green lane, they need to register for a UK Internal Market Scheme (UKIMS) number, they need to prove their goods will not end up in the EU and they have to verify compliance with the government. Some members have reported that they have had trouble securing a UKIMS number due to the fact that they also supply the Republic of Ireland. Meanwhile, the Not-For-EU labelling scheme had been delayed indefinitely, to be later reintroduced with a phased approach, causing uncertainty around implementation.

If firms are exporting goods that are bound for the EU, and travel down the red lane, they have to comply with EU customs checks, which have been consistently complex and time consuming for businesses to navigate. Members have reported that they have not been able to send certain goods to NI due to restrictions, and plus the hassle of paperwork.

“We could not send staff in Northern Ireland the same Christmas Hamper as the rest of the UK due to restrictions. Partially the hamper company does not want the hassle of the documentation, but also certain products in the hampers were prohibited.” (South East England, Real Estate, 100-249 employees)

“Shipping laptops to our staff from our central IT store has resulted in delays and custom forms. Before we just sent by courier – now we need a specialist courier.” (South East England, Real Estate, 100-249 employees)

Additionally, many businesses, especially SMEs, are unsure of what is required of them under the Windsor Framework. There is greater complexity in trading to Northern Ireland now. Sometimes the guidance is hard to interpret. And the delays in the implementation of the rules only makes things harder to follow.

“The changes in the Windsor Framework and post-EU legislation as made trade with NI more confusing, less stable, predictable.” (London, Civil Service/public administration, 10-49 employees)

“the whole green lane red land process relies entirely on goodwill. The shippers are going to dictate how it can and can’t work and it means that any transport to and from NI will have to face either delays to allow for green and red lane goods or increased cost to account for smaller loads of green or red lane exclusive transports.” (South West England, Wholesale and retail trade, 10-49 employees)

All this means that there is the risk that companies in Great Britain may avoid Northern Ireland for concern of being in breach of the labelling/customs requirements, which reduces competitiveness for firms in Northern Ireland.

“if we supply a UK project from Northern Ireland, it is the same process as supplying from an EU country. It would be great if it was a simple as the pre-Brexit era of simply delivering the materials without any paperwork or tax implications. The same is of course true in reverse and is therefore making it more costly to export materials from the UK to neighbouring countries, so we and others like us simply buy from EU countries instead.” (South East England, Construction, 250+ employees)

We cannot let perfection be the enemy of good. Yes, the Windsor Framework has challenges but there is not currently an alternative. Article 16, which gives both the UK and the EU a unilateral power to take action should the application of the Protocol give rise to ‘serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade’, is not the answer.

Indeed, there are obvious benefits for Northern Ireland having unfettered access to both the EU and UK markets. But having a foot in both camps does mean that Northern Ireland is exposed to the same shocks the EU experiences. A very topical example is the imposition of President Trump’s tariffs. The initial 20% tariff on EU imports into the US could have hit firms operating in Northern Ireland in that any escalation could have seen Northern Irish firms getting caught in the crossfire. 90-day pause aside, many firms are concerned about how tariffs will apply to them depending on where their goods have originated from and where they are destined to.

What are the solutions?

Disaggregate the technical from the political

Whilst the wider UK-EU Reset of relations has progressed significantly in recent months, most notably as a result of the increased geopolitical tension rippling from the US, the politics still peppers the narrative. In order to achieve practical policy solutions that directly help businesses, the politics needs to be set aside. This will especially be important as each jurisdiction’s regulatory frameworks continue to diverge, and Northern Ireland is exposed to different rules on each side.

Improve business guidance for GB firms to encourage more trade with Northern Ireland

Northern Irish firms have access to numerous guidance and support mechanisms, such as the Trader Support Service, InterTradeIreland or Invest NI to provide practical help to businesses with all trade, investment, VAT and business issues. Firms in Great Britain do not have the same levels of knowledge on trade with Northern Ireland and the Windsor Framework. Businesses would benefit from greater education, more factsheets, and a helpline where they can turn to for specific questions relevant to their firms. For example, there could be a dedicated Northern Ireland market guide on GREAT.GOV, which hosts export advice, including cultural, sectoral, and customs advice, on all markets in the world.   The government should also offer trade accelerate vouchers for GB firms to access expert advice that reduces the perceived barriers of trade for NI.

An EU Economic Envoy for Northern Ireland  

A dedicated representative could help to bridge the relationship between Northern Ireland and the EU. The EU also has a responsibility to demonstrate that Northern Ireland has a unique advantage from dual market access, which would be best demonstrated through increased Foreign Direct Investment from the EU to Northern Ireland and increased trade opportunities between EU and Northern Irish firms. Their role would include demonstrating the benefits of the Windsor Framework, and the economic value of the Northern Ireland as a nation with access to both the GB and EU markets. Northern Ireland has historically always had a US economic envoy for Northern Ireland which sets the precedent for such a role.

Mandatory impact assessments for any policy developments that impact the Windsor Framework

Northern Ireland and the workings of the Northern Ireland Framework should be taken into consideration with any policy developments that impact either at a UK and EU level through mandatory impact assessments. As the UK accelerates its reset of relations with the EU, continued dialogue will be important to ensure the Windsor Framework is effective and workable for business.

Rapid Duty tariff Scheme

As part of the Northern Ireland Protocol, a Duty Reimbursement Scheme was introduced to ensure that goods that were imported into Northern Ireland, but were subject to EU charges, can claim the duty back, as long as the company can prove the goods stayed in Northern Ireland and did not enter the EU.   HMRC should seek to provide a rapid duty tariff scheme to impacted firms in Northern Ireland and avoid any detrimental impact on cashflow concerns for these predominantly small and medium firms.  We also call on the UK Government to explore more flexible funding or locals via the British Business Bank to ensure firms can access flexible finance

Use the 19 May summit to reset the UK-EU relationship

It is important for the EU and the UK to set out their long-term ambitions for its relationship at the summit on 19 May. A veterinary agreement would help to smooth some of the frictions with the Windsor Framework and should be agreed upon at a pace.

Move at pace

The UK and EU must commit to moving at a faster pace and commit to simplification in order to keep up with the US, which is currently operating its policy agenda at a significant speed.