Chemical industry must remain vocal in Brexit negotiations

06 December 2017

6 Dec 2017

With feedback on Brexit negotiations yet to provide clarity, the message received by delegates at the Chemical Industries Association’s (CIA) Brexit and Growth of the UK Chemical Industry conference in London in November was that government is listening to industry, and industry must continue to make its voice heard.

Stepping in for Steve Baker, Minister for the Department of Exiting the European Union, due to illness, the 600-strong department’s most senior civil servant, Director General Susannah Storey, said that government ‘understands the need for an implementation phase […] and certainty’, and encouraged industry to ‘keep raising your voice’.

The MP later provided the CIA with his planned speaking notes, in which he confirmed the criticality of maintaining the validity of the UK sector’s REACH registrations, and recognised the chemical sector as ‘the industry of industries’. Baker also wrote that he was pleased to attend the earlier Chemistry Growth Partnership (CGP) meeting in November and hear first-hand the sector’s priorities of regulatory consistency, access to skilled people, and the best terms for tariff or non-tariff access to the EU market.

Prior to the conference, the CIA and the European Chemical Industry Council, Cefic, released a joint statement which, alongside calls for a transitional phase after the UK’s expected 2019 exit from the EU, laid out wishes for regulatory consistency, continued free movement of labour, measures to avoid further investment leakage, and positive measures to stimulate innovation.

Echoing the joint statement – which warned that even the most advanced Free Trade Agreement will fall short of the conditions prevailing in a single market – in a snap poll, 59% of conference delegates (including many high-level chemical industry figures) identified maintaining free trade as their highest priority for the negotiations.

Leading the way

Tom Crotty, Director of Ineos and President of the CIA, emphasised that the EU is the UK chemical industry’s most important trading partner, accounting for 60% of chemical exports and 75% of chemical imports. Accordingly, the chemical industry has been highly vocal and quick to engage with policymakers both in the UK and Brussels. 

‘We were, I think, probably the first industry to go to government with our initial wishlist […] we also were the first industry to stand up and publicly say we need a transition period, because we aren’t going to be ready in March 2019. And actually, the CBI followed our lead the week after we came out with that statement,’ said Crotty. In her Florence speech in September, Prime Minister Theresa May called for a two-year implementation phase after March 2019. 

Crotty added that the CIA and its members are submitting written evidence ‘at every turn’ to the EU Select Committee, and have made clear their continual availability for consultation, even providing government with a series of high-level ‘hotline’ numbers that they can call at any hour for an immediate industry view if required during crunch negotiations.  

Another issue likely to affect the chemicals sector is its complex supply chains, which cross borders both within and beyond the EU – sometimes crossing what will be the UK/EU-27 border several times. ‘If they attract tariffs every time they cross, you kill that supply chain – it will cease to exist,’ Crotty said. 

Falling back on WTO Most Favoured Nation status would lead to the reintroduction of import duties on chemical trade and maximum tariff levels of 5.5–6.5% on chemicals trade, amounting to an estimated €40bn annually, and import duty of 3–4% resulting in €1.5bn additional input cost for the chemical industry – costs the CIA-Cefic statement states will result in ‘reduced profitability, lower investments and less future growth’.  

By Simon Frost

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