INSIGHT: Unravelling draft Brexit agreement horrifies chemical industry

Nigel Davis

16-Nov-2018

LONDON (ICIS)–The European Commission’s draft agreement on Brexit is the best deal in town for the chemical industry but the likelihood of it being ratified by the UK’s parliament are slim.

The sector is a spectator to a divisive political battle which threatens free trade and the robust regulatory environment within which it operates with EU counterparts.

“We watch with horror,” Chemical Industry Association president Tom Crotty said on Thursday as UK government ministers resigned in the face of the draft withdrawal agreement. On a day of political turmoil, the UK trade group stressed the importance of a continuing, positive relationship with the sector’s major trading partner.

The draft agreement provides a framework on which a more precise working relationship can be built but it has to survive a political storm which may yet see its complete rejection.

The UK could still drop out of the Union on 29 March, fall back on WTO rules and lose access to hugely important regulatory programmes such as Reach. There are contingency plans but few bear thinking about too long and hard.

A hard Brexit “is a disaster for business and a disaster for jobs”, Parliamentary Under Secretary of State at the Department for Business, Energy and Industrial Strategy, Richard Harrington, said at the CIA’s annual dinner on Thursday 15 November. But it is only one of a range options or scenarios that could develop over the coming months.

“A hard Brexit is not acceptable,” Harrington said. “I believe that [this deal] is the best available.”

A worst-case scenario for chemical manufacturers would be a disorderly Brexit. The draft agreement provides a framework for a more robust arrangement and a future relationship between the UK and the EU. But where industry executives might expect further negotiation and compromise, there are lines which many politicians are not prepared to cross. Sight of the industry view clearly can be lost.

“Brexit is something we didn’t want but we’ve got it, and if you stand back you find yourself in the odd position of supporting the [billions to be spent] to support a deal we didn’t want,” Crotty said earlier on Thursday.

A CIA Brexit conference had been told it seemed unlikely that the withdrawal agreement will pass through the House of Commons.

If that is the case, it is unclear what the outcome would be with time running out before the UK’s departure date from the EU, 29 March 2019, and even EU Parliament elections in May. Remain could be an option but is unlikely with the current UK government in place.

Some MPs suggest there are four options: the so-called May deal; no deal; a European Economic Area plus customs union type of arrangement; and no Brexit.

The draft is said to have frictionless trade at its core and reflects what government has heard from business.

Technically, a timeline would involve drafting a detailed framework over the next few days; moving to ratification on the EU side at a special EU Council meeting on Sunday 25 November; discussion of the full package in the UK parliament and a meaningful vote on the proposed EU Withdrawal Bill later this year.

Free trade and regulatory alignment, including future access to European Chemicals Agency (ECHA) Reach data – by no means pinned down in the draft agreement – are the core issues for chemicals. Currently, the ECHA is prepared for a hard Brexit.

By Nigel Davis

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?