Sector News

Reuters: UK chemicals industry says Brexit could cost sector 500 million pounds

March 1, 2019
Chemical Value Chain

UK chemicals companies face being shut out of a common EU products registry after Brexit and would need to pay around half a billion pounds ($664 million) to set up a British counterpart, the head of the Chemicals Industry Association told Reuters.

The sector – which includes companies such as Ineos, Johnson Matthey, Croda and Synthomer – is bound to the European Union by an especially dense web of laws and safety standards as well as supply chains which loop back and forth repeatedly across the English channel.

If the UK crashes out of the EU without a deal, it will immediately be excluded from a strict set of EU laws on safety and production of chemicals called REACH and locked out of a Helsinki-based data registry underpinning trade called ECHA.

The government is planning to copy REACH guidelines and set up a domestic registry in case of a no-deal Brexit, but the industry and campaigners are wary of the plan.

“Companies have been generating and submitting data to Helsinki for a decade. We estimate submitting that again to a UK REACH would cost them a total of around half a billion pounds,” Stephen Elliott, chief executive of the Chemicals Industries Association, told Reuters.

“Our line since the day after the vote for Brexit has been that the industry is registering zero percent appetite given the interconnectedness with the EU,” he added.

ECHA plans to open a near three-week “Brexit window” ending on March 29 – when Britain is due to leave the EU – for UK chemicals firms to register subsidiaries in EU countries in order to gain access.

For some companies, it may be cheaper than seeking to access data from ECHA on a case-by-case basis, in which looking up information on even a single chemical product can cost tens of thousands of pounds.

DEEP UNCERTAINTY
There’s a lot at stake for the country and the sector: chemicals is the UK’s second-biggest exporter to the EU and the second largest manufacturer behind the car industry.

With 60 percent of UK chemicals exports going to the EU, and 75 percent of its imports coming from the bloc, it’s common for a single chemical or product to be bought, developed and sold back and forth repeatedly between the UK and EU countries.

Strategies employed by chemicals companies include stocking up before Brexit day, gaining EU access by setting up a presence in a member country or winding down UK sales.

Prime Minister Theresa May hopes parliament will ratify a divorce deal with the EU which will give businesses an 18-month interim period to adjust to the rules of a new relationship.

Deal or no deal, chemicals businesses face deep uncertainty.

While May’s government hopes to stay a party to REACH after an exit agreement, EU officials have said such a move may require staying in the bloc’s common market or subjecting its activity to the European Court of Justice.

But leaving both bodies has been a main plank of Brexit supporters, who say they curtail British sovereignty.

Kate Young, a campaigner with industry watchdog group CHEM Trust, warned that parting with ECHA might see the sector increasingly deregulated and lead to a relaxation of safety and environmental standards.

“The bureaucracy is stretched given all the preparation for Brexit and the government has a deregulation target of 9 billion pounds, which is a huge disincentive to strict standards,” Young said.

“We’re concerned that as the EU makes progress and goes forward, the UK will just be falling back.”

By Noah Browning

Source: Reuters

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