EU needs clearer, stronger push for competitiveness – UK’s CIA

LONDON (ICIS)–Following the June referendum on the UK’s EU membership, the 28-country bloc will have to push for a clearer, stronger agenda to lift chemical firms’ competitiveness in the international sphere and this would be better facilitated if the UK remained within the union, the CEO of the country’s chemical trade group said this week.

The Chemical Industries Association (CIA) conducted a survey among 93 of its members in which not a single company showed support for leaving the EU. Two thirds backed staying in and one third did not have an opinion.

“It’s quite a clear position. Why is it so clear cut? If you look at the export trade intensity of the chemical sector it is very high. I can’t think of a single member company who isn’t concerned with exports as their balance of production tilts towards exports,” said CIA’s CEO Steve Elliott.

However, he insisted the EU needs to do more to enhance the global competitiveness of its industrial sectors which suffer higher energy costs than competitors in the US and to some extent in China, while the “very ambitious” targets the EU is seeking in terms of CO2 emissions reductions would also place a burden on European energy-intensive sectors like chemicals. 

“Some outcome we get from the vote [among CIA members] is that we are much more sensitive to international competition. In my view, the EU’s competitiveness agenda wasn’t crunchy enough. While in the US they have energy security, which will turn into product-dominance, for us in the EU the clock is certainly ticking – that’s a very major concern for the chemical sector and manufacturing in general,” said Elliott.

“We can be much more sympathetic to what other parts of the world are doing in emissions, for instance. I still think we are out of sync – the Americans have come to [emissions] reductions almost by accident, thanks to shale gas. I think the EU is very ambitious [on emissions reductions].”

To start alleviating the burden of high energy costs, Elliott said the testing and further exploitation of shale gas in the UK could bring a certain reinassance to the country’s manufacturing, although he conceded it would never achieve the extent of that seen in the US.  

The latest polls published in the UK showed a narrowing between the two camps. A poll of polls by the Financial Times newspaper on 18 April showed 43% of respondents would vote to stay within the EU while 42% would vote to leave.

The still-large number of undecided voters is making the possibility of a leave vote more feasible. When the UK’s prime minister called the referendum in February, the so-called Remain campaign had a clearer lead.

The chief operating officer for chemicals at auditor KPMG urged on 18 April chemical companies with operations in the UK to start making contingency plans in case the country votes to leave the EU on 23 June.

“I don’t know the extent of contingency plans [made by chemical firms in the UK]. The polling of the poll of polls suggest the gap is narrowing but there is still some time to go. The primary topics we’ll focus on will be the competitiveness topic, as opposed to the more emotional ones – sovereignty and migration,” said Elliott.

He went on to say if the UK is to remain in the EU following the referendum most businesses within the chemical sector believe the status quo of relations between the UK and the EU should change. However, he warned in case of a vote to leave the EU – known as Brexit – the negotiations to strike a trade deal with the UK’s largest trading partner would be difficult.

“If the boot was on the other foot, and this was France or Germany wishing to leave [the EU], I would find it very hard to believe the UK government would make life easier for them to the extent that their future deal and arrangement with the EU was better than the current one,” said Elliott.

“[Whatever the outcome] It’s going to be tough either way. One thing a lot of businesses who support to stay are saying is the status quo should not remain. We need to stay [in the EU], but stay to influence better than perhaps we have done in the past,” he added.

Elliott was referring to the troubled relationship the UK tends to have with the EU, arguing the country has sometimes shied away when striking good deals in Brussels – the EU capital – on the back of fears of being seen at home as “politically and culturally supportive” of the European project.

Interview article by Jonathan Lopez