Commentary: UK’s CIA backs Europe

In the final days leading up to Britain’s 23 June referendum on exiting or remaining in the European Union – the so called Brexit – the debate has descended to sometimes farcical levels. On 15 June we witnessed the rock star Bob Geldof sailing up the Thames in London to disrupt a flotilla of pro-Brexit fishing boats led by the UK Independence Party leader, Nigel Farage.

On the same day they were trading insults, the CEO of UK trade group the Chemical Industries Association was giving a more sober analysis of the potential impact on the UK’s chemical industry. Many UK-headquartered chemical companies questioned on the topic prefer to remain neutral and have left it up to their trade group to voice their concerns.

The CIA’s Stephen Elliott is unequivocal: “From the industry’s point of view, staying in is a no-brainer. Chemicals has a huge amount of external trade with 50% of our chemicals exports going to the EU and 75% of our imports coming from the EU.” In April the CIA surveyed its members on Brexit and found that 0% of respondents were in favour of exiting. Chemicals is the only sector in UK manufacturing with no dissent on the desire to remain in the EU. This can, perhaps, be attributed to the global and free-trade focus of the industry in the UK.

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Elliott believes the country is in a stronger negotiating position on trade deals as part of the EU. “With the EU we negotiate collectively. When trade deals get difficult it’s because our trading partners can’t roll us over, and that’s because we have clout [as a single EU trading bloc]. On our own doing trade deals would become more difficult.”

EU trading partners such as the US want to deal with a common, pan-European market. Treaties such as the Transatlantic Trade and Investment Partnership are proving tough to finalise because of the EU’s tough stance on the terms of the deal.

The UK would be in a weaker position on its own, he believes, adding “We would have trouble getting to the front of the queue in negotiations if Brexit occurs.”

Some in the Brexit camp say it would be a chance for us to exit and then re-enter under a new deal. “But if I was the German Chancellor, why would I make life easier for the UK to re-enter?”

If the UK does exit, the next step is a two-year period for the country to detail its future relationship with the EU. But this will also require the approval of the rest of the EU member states. Elliott does not predict a big roll-back in regulatory burden on the chemicals sector in the event of a Brexit. Industry will still probably have to comply with Reach. The UK could adopt a model similar to Norway which has chosen to adopt current and future EU legislation such as Reach. “Over the two-year period we’d ask what model should the UK follow – that would take time and resource. Our industry and manufacturing have a long-term investment cycle so we don’t need unwelcome uncertainty.”

CHALLENGES FOR CIA

A leave vote would mean rapid adjustments for the CIA itself: “We may have to move quickly – what about our relationship with [Europe’s trade group] Cefic?” The group would require extra resources and could form new alliances with the Swiss and Norwegian chemicals trade associations to help better understand the options open to UK chemicals. “We would play our part to influence the new arrangements: competitiveness is key for us so our focus would be around the business agenda and how to ensure that chemicals remains the UK’s largest export earner.”

Whichever way the vote goes, though, Elliott says the CIA will welcome the result. He sees the referendum process as a huge opportunity to push the business agenda on competitiveness, the acceleration of trade deals, the single market and regulation.

“Personally I want UK politicians and civil servants to get more stuck into the decision-making process at the EU level. From the inception of an idea right through the process to implementation and enforcement.

We do play our part but not consistently and continually along the way.” Meanwhile, UK petrochemical companies are reporting a fall in orders ahead of the referendum.

“Customers are reducing their volumes by 10% because of the approaching EU referendum in the UK,” a buyer of caprolactam estimated.

A polystyrene distributor added: “May volumes were lower than what we saw last year on all grades. Customers have no idea what is going on but it is clear that their customers have reduced their order intake.”