Chemicals in the eye of the storm as UK heads for a WTO Brexit on 1 January

Chemical companies

On Friday, the UK premier confirmed what many of us have expected for a long time. There is unlikely to be a trade deal with the EU27 when the UK leaves at the end of December:

“We should get ready for 1 January with arrangements that are more like Australia’s – based on simple principles of global free trade.”

In reality, of course, what Boris Johnson meant was that the UK will be trading on WTO terms, and without Australia’s better weather.

And when he said “more like Australia’s”, he didn’t actually mean “Australian terms”. Australia has duty-free quotas in key areas for its economy such as sheep – but UK sheep farmers will face tariffs of 40% – 80%.

Many wishful thinkers still imagine the EU27 will eventually offer a deal that gives the UK access to the Single Market and Customs Union. But in reality:

  • There was never any chance that the EU would agree to a Canada-type deal with its nearest neighbour.
  • It is well established that the volume of trade halves as distance doubles.
  • Canada is 6622km (4115 miles) away from the EU, but the UK is only 34km (21 miles) across the Channel.

IT IS TIME TO PREPARE FOR WTO TERMS

So the critical need now is for UK and EU27 chemical businesses to prepare for trading on WTO terms.  This will not be easy:

  1. The first step is to get an outline of the key issues from the 3 minute Ready for Brexit video linked above.
  2. Then you need to go to the UK government transition site or your own government’s site and take its questionnaire.
  3. You will suddenly realise the vast range of potential impacts from Brexit – and how little time is left to prepare.
  4. At this point, you may want to visit Ready for Brexit and sign up for membership.

Colleagues will know that I have always assumed that Brexit would mean trading on WTO terms.  And my main concern has been that most industry managers have only known a time when trade between Birmingham and Berlin was the same as between Birmingham and Bristol, or Berlin and Bremen.

Many chemical companies will likely have a terrible shock after 1 January, when the reality of WTO terms starts to become clear. We will be one of the industries worst impacted, due to our central position in the value chain.

ARE YOU READY FOR BREXIT?

This is why I set up Ready for Brexit in 2017 with chemical industry colleagues, all equally experienced in importing and exporting. Critically, we can remember what it was like to trade before the Single Market and Customs Union – and the teams of people that were required to make things happen. The site therefore includes all the tools that we think you need to go up the learning curve as quickly as possible:

  • The Directory provides links to all the key areas involved: Customs & Tariffs, Finance, Legal, Services & Employment, Supply Chain.
  • The BrexList checklists focus on the key issues, the key functional areas and map the business issues to the Directory.
  • The No Deal Action Plan is your short-cut to the absolute basic list of actions that you must review before year-end.
  • The BrexSure audit tool is for you and your supply chain – there’s no point in you being ready, if your suppliers and customers aren’t.
  • The Negotiation Update references all the key stages in the negotiations since the referendum.

We have tried to keep the cost reasonable at £195 (or local currency equivalent). But it has taken us years of accumulated effort and research to pull together reliable information on these critical areas. When we started, there were already thousands of Brexit references on Google – today there are 164 million.

Christmas and the New Year are normally a time for pantomimes and conjurors pulling rabbits out of hats.  We can all hope that the Brexit talks pull their own rabbit out of a hat in the next 74 days. But it would now be very risky to rely on this happening.

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