Think tank: EU businesses demand economic relief

23 March 2009 00:00  [Source: ICB]

Industrial policy is at a crossroads, the European Commission admits, and requires strong action. Not surprisingly then, ahead of a key meeting in Brussels, Europe's big industries have asked for more funding.

They want immediate assistance to help cope with the current economic crisis and further long-term policy support.

For the chemical sector, this has been distilled down to a call for accelerated payment of VAT (value-added tax) and tax credits for research and development, deferred registration payments on the expensive Reach chemicals control system and more efficient innovation funding.

These are issues that could have been worked out in the fullness of time, but now need urgent attention. "The economic crisis has had an unprecedented impact on Europe's chemicals industry, particularly hitting base chemicals, polymers and specialty chemicals, due to collapsed demand from end-users such as automotives and construction," chemical trade group the European Chemical Industry Council (Cefic) said last week.

"SMEs [small and medium-sized enterprises] in particular, already facing increased costs stemming from the implementation of Reach, are seriously affected," it added.

The chemical sector does not so much want support, but an oiling of the wheels that drive European commerce. It is also seeking a more industry-friendly approach to Reach and the EU's climate control plans enshrined in the Emissions Trading Scheme and in worrisome Integrated Pollution Prevention and Control legislation proposals.

The proliferation of EU legislation will be an additional burden on companies struggling to cope with the credit crunch and deep recession. It pushes harder the notion of smarter regulation.

Put into some perspective, chemicals production dropped by more than 15% in December. Output in January and February is likely to have been no better and was probably worse. EU chemical output is expected to shrink by about 6% in 2009.

Companies need to better manage working capital in such difficult times but are facing an uphill battle. They could do with more VAT relief. It would also help, as Cefic points out, if public authorities (and others) paid their bills on time. The credit squeeze hurts and continues to strangle business.

The EU faces not only the potential rise of protectionism but also the lack of policy coordination and a more interventionist attitude from some member states.

Europe's bureaucrats have an opportunity to help refine policy making and streamline some of their ideas to better suit troubled times.

By: Nigel Davis
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly