BARCELONA (ICIS)--A secret UK government report which picked out the chemicals industry as the worst affected by Brexit confirmed the country’s chemical trade group’s concerns, according to its CEO.
The report published by UK newswire BuzzFeed on 30 January said that the UK economy will be worse off in whichever form Brexit eventually takes, and named chemicals as the most hard-hit industrial sector.
“This report reaffirms everything we’ve been worrying about in terms of tariff implications, and non-tariff barrier implications, in the event of regulatory inconsistency and divergence. Also the extent to which there is a block on people and skills,” said Steve Elliott, CEO at the UK’s Chemical Industries Association (CIA).
He said he has yet to receive an answer to a letter he wrote before at the end of 2017 to Michael Gove, the UK’s Secretary of State (minister) for Environment, Food and Rural Affairs.
In the letter, Elliott pointed out that the chemicals industry wants regulatory consistency with REACH, the 28-country EU’s main chemical regulation.
That would mean the industry should stay within REACH and under the administering regulator the European Chemicals Agency (ECHA).
With 60% of the UK’s chemical exports heading to the rest of the EU, and 70% of its imports heading the other way, there are fears that blocking access to that market via regulatory divergence could be damaging.
REACH is also seen as a gold standard in regulation and is being emulated by other countries. South Korea, for example, has implemented K-Reach.
Divergence by UK chemicals could threaten easy access to other markets.
“On regulatory divergence, our message holds that for something like REACH it’s a question of market access and standards setting. Sticking as close to, if not within REACH, enables that access to our most important market,” said Elliott.
The CEO said he felt reassured by a letter to business published earlier in January from three UK ministers Greg Clark (business), Philip Hammond (finances) and David Davies (Brexit). In the letter, the three pledged that there would be no change for business during the two-year transition period.
“So that’s great. Now we need that to be nailed down opposite the 27 [EU minus UK]. If you look at REACH, for example, there are still some big, big questions."
He wants reassurance that all the work and money committed by UK chemical companies to REACH will remain valid after March 2019, when the UK formally leaves the EU.
The regulation has demanded a huge amount from industry in terms of submitting data, working in consortia, cost-sharing and submitting registrations.
“If we have a two-year transition phase that does not necessarily equate to the timelines required by business – sometimes we need longer than that. Decisions need to be taken to secure certainty for business for the next three-five years for investment decisions.”
Minimising disruption to supply chains across the EU27 from Brexit is a key objective on both sides of the English Channel, said Elliott.
In November 2017, the CIA and Europe’s chemical trade group Cefic signed a joint statement emphasising the need for a smooth transition.
Elliott added: “What you’ll see more from us, and potentially from the UK government, is more engagement across the channel with member state governments and from us with member state trade associations.
“We will convey a similar message away from the politics that it would be great if this industry could face as minimal disruption as possible.”
Over the next few weeks, Elliott said he also expects to see more established formal working groups between industry and government.
“With the negotiations in mind we are starting to move to what are the very practical and operational issues that we face. That ranges from regulatory affairs expertise through to customs and trade facilitation expertise,” he said.
Responding to the publication of the leaked report, a government spokesperson said: "We have already set out that the Government is undertaking a wide range of ongoing analysis in support of our EU exit negotiations and preparations.
“We have been clear that we are not prepared to provide a running commentary on any aspect of this ongoing internal work."
In an interview with ICIS on 30 January, the CEO at the UK trade group Chemical Business Association (CBA) said that some chemical companies in the country are already shifting operations to other jurisdictions in the EU because of uncertainty surrounding Brexit.
Picture source: CIA
Interview article by Will Beacham