Commentary: first clues given on UK government's Brexit strategy

08 September 2016 23:10 Source:ICIS Chemical Business



 David Davis has unveiled the government’s Brexit strategy

As the UK parliament returned from its summer break, the government has made a first attempt to set out its agenda for Brexit. The statement by new Brexit secretary, David Davis, was short on detail and drew a barrage of criticism from opposition MPs as well as from some members of his own party.

Although we are still at a very early stage in the Brexit process and government planning, it is possible to pinpoint a few policy directions which might help chemical industry executives in the UK, Europe and further afield who are anxiously following the process.

We can be sure that the government currently intends to plough on with the Brexit process and will resist calls and legal challenges calling for a second referendum. Davis reiterated Prime Minister Theresa May’s stance on this.

Members of Parliament will not be allowed a vote on triggering Article 50 of the Lisbon Treaty which will formally begin the Brexit process.

Opponents of Brexit had hoped to stall and then end the process using one of these methods.

Restrictions on immigration remain central to the strategy, although what form these will take is up for grabs. There are calls for a point-based system or one which will only allow EU migrants with a job offer.

This policy might make it less likely that Britain could remain part of the EU single market of 500m people whether through continued EU membership or other options such as joining the European Free Trade Association. EFTA members have full access to the single market but also have to abide by its rules, including the free movement of labour.

Any deal which allows the UK to access the single market whilst imposing immigration controls would meet strong resistance from other EU members.

Other EU countries face a dilemma because it is in most of their economic interests to promote trade with the UK. On the other hand they don’t want to give the country an easy ride as it exits the EU for fear that other members might seek a similar deal.

There are real fears that Brexit could trigger the disintegration of the EU itself. David Davis trumpeted the UK’s status as a leading proponent of free trade and insisted that there could be a positive outcome for the country, allowing it to “confirm its place as one of the great trading nations in the world” and giving it access the single market.

Another point which remains clear is that the UK is in no hurry to get the Brexit process started.

The UK will be keen to promote free trade deals with other countries and regions and in theory acting on its own could be more efficient as it will not need to cooperate with other EU member states.

However there was bad news on this from the G20 summit in China.

US president Barack Obama said the country would not make a deal with the UK a priority as it wants to conclude deals it is already working on such as the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership.

There were warnings from the Japanese delegation that the reintroduction of trade barriers and tariffs would lead to Japanese businesses pulling out of the UK altogether or relocating regional head offices to mainland Europe.

Japan is a major investor in UK manufacturing with Nissan locating a major automotive plant there.

Hitachi recently opened a factory which makes trains for the UK market but also aims to target Europe.

So far the chemical industry appears to remain committed to UK operations. INEOS announced a major ethyl acetate expansion at Hull shortly after the referendum result was known.

And German distributor, Brenntag, recently put out a statement asserting its commitment to the country.

By Will Beacham