- Created: 28 October 2016
In the bright new world of post-Brexit trade deals for the United Kingdom, what does Britain's largest export-earning sector think?
UK chemicals and pharmaceuticals companies export about £50 billion worth of their products each year, with 60 percent of those exports going to other EU countries. A pre-Brexit survey carried out by the Chemical Industries Association found not one company that wanted to leave the EU. The sector would ideally like business to continue as usual, with uninterrupted EU single market participation.
Being on the outside could mean tariffs for those exports, but that is not the main concern. Of much greater significance is whether the all-encompassing EU REACH regulation – registration, evaluation and authorisation of chemicals – will continue to apply in the UK.
Under REACH, companies must submit chemicals data to the Helsinki-based European Chemicals Agency, which subsequently decides on restrictions or bans for any particularly nasty substances. To minimise animal testing, companies are required to cooperate and send to the agency one registration per substance.
In the case of total UK separation from the EU, REACH would continue to apply in the UK until the British government changes it. UK chemicals companies would also have to continue to comply with REACH for their EU exports. However, ongoing REACH-related decision making – for example, whether a substance should be banned – would no longer apply in the UK without a parallel UK decision. Any future interpretations of REACH from the EU Court of Justice would also not have effect in the UK. British companies would be cut off from the data- and cost-sharing mechanisms of REACH.
All this spells extra expense for companies and government that will far outweigh any tariffs. If the UK continues with a UK-REACH, it will have to set up its own decision-making apparatus. Companies face the prospect of complying with EU-REACH and UK-REACH, which could diverge over time, for example with a chemical being banned in one jurisdiction but not in the other. It will also be a challenge on the government side to find the expertise to administer a UK-REACH – many of the top British chemical scientists now work for the agency in Helsinki.
And the UK will lose out in another respect. Because decisions under REACH can only be addressed to EU companies, non-EU firms must appoint representatives located in the EU to do all the paperwork. Many of these representatives have set up in the UK – they are responsible for 42 percent of all registrations from the UK sent to the European Chemicals Agency. Brexit will force them to relocate or go out of business.
By Stephen Gardner. A version of this article was published in Private Eye.