LONDON (ICIS)--The UK government has a better understanding of the workings and importance of the chemicals industry in the approach to Brexit today than it has had since the days of Imperial Chemical Industries (ICI), the CEO at the country's chemical trade group said this week.
Steve Elliott, from the Chemical Industries Association (CIA), said UK government departments are making increasing enquiries to chemical industry associations and companies in the sector as understanding grows of the importance of petrochemicals and pharmaceuticals to the country’s economy.
“I don’t think government has ever had a better understanding of our industry than it does now – maybe since the days of ICI, when life was probably more straightforward in terms of understanding the sector,” he said.
The association has been asked by government staffers to give examples of trade issues posed by Brexit, such as the supply chain risks of tariffs and barriers when materials are being transported back and forth across borders in the process of formulation.
However, it can be difficult to find companies willing to talk about the specific impact on their product lines of a less porous barrier between UK and mainland Europe, according to Elliott.
“We have been asked to give examples of supply chains, to demonstrate how many times from building block to finished product something crosses an EU28 border,” he said.
That’s part of the challenge here: when there’s a supply chain issue it’s difficult to make that public, because companies will not want to make public their vulnerability,” he added.
Whether that knowledge results in a Brexit deal that is favourable to the industry remains to be seen, with government departments so far giving no indication to Elliott that there is a specific model of Brexit currently being worked towards.
“I think there’s an awful lot going on. It’s such a gargantuan task – but if they are working to some grand plan or outcome, we’re not party to it,” Elliott said.
“The easiest outcome you can model is a no deal, falling back on WTO terms. That’s the easiest outcome to model, but it’s clearly not a desirable one,” he said.
Another issue is the likely disparity between the duration of the transition period that may be necessary and what may be politically feasible, he added.
“I think politically it would be unrealistic to promise anything more than two years for a transition. This government, if it stabilises, has a fixed term to 2022, and we formally exit the EU in March 2019. If you are the Conservative Party, you will want to be past this a year ahead of election season,” Elliott said.
“Ideally, the transition should be as long as is necessary, and more than two years would be great. But I’m not sure that’s politically realistic… does this mean that Reach is so complicated we need five years rather than two? We don’t know,” he added.
The question remains, in light of the lack of progress on negotiations between the UK government and the European Commission, whether a transition deal – to maintain current arrangements while the details of a post-Brexit trading relationship are finalised – will even be agreed.
“If it looks like there will be no deal and no prospect of one, I’m not sure the Commission is going to be keen on a transition. We think they need it as well, but there could well be pressure from the [EU]27 on [Michel] Barnier saying ‘there’s no transition unless there’s a prospect of a deal’,” said CIA employment and communications director Simon Marsh.
“Even accession to the WTO has to be agreed by all WTO members, so it’s not automatic. There is no such thing as no deal, it’s just the extent to which it’s not a very good deal,” he added.
Proponents of Brexit have argued that the capacity to dictate the terms of the country’s future justifies the economic uncertainty, and there is one area in particular where the chemicals industry has chafed under the diktats of Brussels.
The industry’s response to Reach since it was introduced nearly a decade ago has shifted from anger to grudging acceptance – and while many company chiefs have publicly made their peace with it as the final deadline approaches next year, some, such as Dow’s Heinz Haller, remain vociferous about the legislation.
“They’re regulating the hell out of us,” he said during a panel discussion at the Cefic general assembly in Vienna last month.
While Brexit could allow the government to roll back some or all of Reach, the increasing influence of the system in driving chemicals legislation across the world means it would be difficult to break away from it, particularly now that the money on compliance has already been spent, according to Elliott.
“Reach is increasingly becoming the global regulatory bar for chemicals, and is definitely being mirrored pretty closely in Far Eastern markets… There may be some flexibility around how we implement and enforce, but generally I think the plan should be to stick close to the regime,” he said.
“We are in the last phases of the final registration period, and as much as we don’t like it, we are where we are and it would be far too expensive to start again,” he added.
Interview article by Tom Brown
The CIA is hosting an all-day conference on Brexit in London on Thursday 16 November. Click here for more information.