Key points
Trade in goods and services between Great Britain and Northern Ireland is estimated to have been worth £24.7 billion in 2019. There is some evidence of disruption to the flow of goods from GB into Northern Ireland since the Protocol took effect, with exports from the Republic of Ireland to Northern Ireland expanding rapidly.
The triggering of Article 16 of the Northern Ireland Protocol need not necessarily be regarded as some kind of “nuclear option”, as it is something that is allowed for as part of the Protocol itself. But, in the event of the UK triggering Article 16, the EU has threatened to respond with legal action and retaliatory measures in the form of levying tariffs on some UK goods exports. This could easily escalate into a complex legal and trade war, though it’s unlikely to lead to the abandonment of the Trade and Co-operation Agreement.
A decision by the UK to invoke Article 16, and perhaps just the threat of doing so, would be liable to cause sterling to depreciate modestly in value. The impact on trade would be largely confined to those products covered by the EU’s countermeasures and the UK’s subsequent responses, but would be unhelpful for businesses as they struggle with the supply chain logjams resulting from Brexit and the Covid pandemic.
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