The UK’s chemicals trade group CIA welcomed on Wednesday the draft Brexit deal agreed with the EU, but Prime Minister Theresa May has called a government meeting later in the day to seek their support for the agreement.
May faces a tough challenge. She first needs to persuade her government colleagues to support the deal, and then seek approval of the UK parliament, which is deeply divided on the matter.
May’s Conservative Party has only a slim majority in Parliament, and she gets support from Northern Ireland’s DUP, whose first reaction to the deal was negative.
Some details about the deal have been leaked to the UK press, which would include a temporary UK-wide customs agreement which will be terminated if and when a new free trade agreement is signed between the EU and UK.
This would allow frictionless trade to continue between the Republic of Ireland and Northern Ireland – a key sticking point in the negotiations.
The customs agreement will be reviewed in July 2020, six months before the end of an official transition period, and according to reports it could then be terminated or extended by up to one year if no trade deal has been agreed.
An independent arbitration panel will be set up to decide when to terminate the customs agreement, comprising equal number of UK and EU representatives plus an independent advisor.
The pound sterling rose sharply on the news, rising to its strongest position against the euro in almost seven months on 13 November before falling to £1:€1.15 by 10:00 UK time.
Against the dollar, sterling was trading at £1:$1.29, also rising slightly following news of the draft deal.
Continued free trade in chemicals between the UK and EU has been one of the main demands of chemical trade groups in both jurisdictions, which this deal would offer.
The UK’s Chemical Industries Association (CIA) said to ICIS on Thursday that while details were still scarce, the deal would signal a way forward for the industry, providing it with much-needed certainty.
“I am pleased that after 18 months of talks the UK and the EU have documents they have agreed on. The challenge now is the view of the whole Government and of Parliament,” said CIA’s CEO Steve Elliott.
He added that he plans to meet with Government officials and Members of Parliament (MP) to “continue to discuss the importance of having a future agreement” with the EU that contemplated the chemical industry’s interests.
The EU-wide trade group Cefic had not responded to a request for comment at the time of writing.
The European Chemicals Agency (ECHA), which regulates the EU’s Reach chemicals regulation, said that it could take “until early 2019” to have a final Brexit agreement.
“Only thereafter, companies may benefit from a transition period, which would give them more time to prepare for the effects of the UK withdrawal from the EU,” it said.
London-based equity analysts at Deutsche Bank said that the draft deal had been the “easy part” and May would need to sell it to a divided Parliament “full of vested interests and factions”, forecasting that the first reactions to the news were not encouraging for May.
His view would be supported by the pound sterling’s value, which rose sharply following the news in the afternoon on Wednesday, but started losing ground in the evening when negative reactions to the deal started trickling through.
“After 873 days of bickering, point scoring, intransigence on both sides, and seemingly irreconcilable differences, we finally have a deal … The initial political reaction wasn’t brilliant, with attacks coming from all directions,” said Jim Reid, head analyst at Deutsche.
“Maybe I’m reading too much into all the initial comments from MPs from all sides who haven’t seen the full deal text, but at this stage I can’t see how the deal passes through Parliament. Time will tell and maybe views will soften.”
Source: ICIS News
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