Businesses in Northern Ireland are experiencing a “feast or famine” effect from the protocol, according to a report from the British House of Lords.
The committee report has called for a reset in relations between the United Kingdom and the EU.
The Protocol on Ireland/Northern Ireland Sub-Committee found that businesses relying on trade with Britain have lost out, while those trading cross-border and with the EU have benefitted.
The report could not identify any overall economic impact because of the incompatibility of data from Ireland and Britain.
However, it said that Northern Irish firms trading with Britain were experiencing negative effects, including increased bureaucracy, staff resources, cost and delivery times, while smaller businesses were disproportionately affected.
There was concern about regulatory divergence between the UK and EU and a fear that British companies would withdraw from the Northern Irish market.
There was also “widespread” concern among businesses about the practical feasibility of the British government’s proposals for a dual regulatory regime contained in the NI Protocol Bill, which is going to the Lords this autumn.
It would allow businesses to decide themselves whether to comply with EU or UK standards.
The report also acknowledged that meat and dairy processors were dependent on complex cross-border supply chains that would be damaged if access to the EU Single Market was lost.
The report, which is a follow-up to a previous study a year ago, called for a renewed commitment to rebuild trust and dialogue and to repair damaged relationships.
The committee collected contributions from the five largest parties in the Northern Ireland Assembly, the UK and Irish governments, business groups and academics.
The report found businesses wanted a number of mitigation measures, including derogations and grace periods for the introduction of further EU regulations to be made permanent, for a green customs channel for products destined for Northern Ireland and for UK-EU SPS/veterinary agreement.
Committee chair Michael Jay said the state of political dialogue had deteriorated since the last report.
“As one of our witnesses told us, those who negotiated the Belfast/Good Friday Agreement were able to do so because of their ability to appreciate the perspectives of others and willingness to work together and take risks to achieve a common goal despite historic differences,” he said.
“Such a courageous approach is needed now.”