EU Referendum

Brexit: chemical complications


Such is the poverty of reporting on Brexit issues that yesterday we were able to see a report from Bloomberg on the potential effects of separation on the chemical industry with absolutely no mention of REACH.

Yet, unless REACH issues can be resolved before Brexit, it is almost certain that exports to EU Member States will be badly disrupted if not halted altogether.

Trade bodies have already been questioning whether Brexit will affect the 6,000 or so registrations attributed to UK companies, and have said that the UK will need to consider the status of existing REACH registrations during the negotiations and before exiting "to ensure that they do not become invalid".

That was in February, after we'd written our own evaluation on the issue but the subject has been barely raised since, and not at all in the legacy media – other than in some quarters where it is suggested that chemical safety regulation could be scrapped – a sure recipe for disaster.

However, at least the Environmental Audit Committee has set in train an inquiry on "The Future of Chemicals Regulation after the EU Referendum", which it announced on 21 December last year – and event which was completely ignored by the legacy media, then and since.

Even then, progress is slow, with the latest oral evidence session on 7 March. Then we heard from Andreas Herdina, Director of Co-operation, European Chemicals Agency (ECHA); Harvey Bradshaw, Executive Director for Environment and Business, Environment Agency, and Dave Bench, Director of Chemicals Regulation Division, Health and Safety Executive.

Not dissimilar from the experience with Jim Harra giving evidence to the Treasury Committee on customs issues, we see from the officials an extraordinary complacency, with no attempt made to stress to MPs the consequences of a failure to strike a deal with the EU over recognition of existing registrations.

The point that we sought to make back in January is that chemicals can only be registered under the REACH Regulation by a body established within the EU (or EEA). Post-Brexit, UK manufacturers will no longer comply and will be required to appoint "only representatives" to take over the registration process.

Without special concessions from the EU – making unique relaxations for UK companies – our manufacturers face the prospect of having to appoint representatives to re-register their products, at a potential cost of £250 million.

As important will be the time delay: the ECHA will not be able to process nearly 6,000 applications, and trading cannot recommence until new registrations have been granted.

Furthermore, as we learn from the latest oral evidence, the ECHA does not operate on a total cost-recovery basis and requires a subsidy from EU funds to make ends meet. It seems hardly likely that the EU will be rushing to subsidise the re-registration process, in which case the UK will be finding it necessary to offer financial inducements in order to expedite the process.

The political implications of this hardly need stating, but one can certainly see the "Ultras" putting pressure on Mrs May to block any payments for what many see as burdensome "red tape".

Yet to come, though, is trade body evidence to the select committee, although we are getting a taste of how complex regulatory conformity might be from the written evidence provided by Defra.

It makes the point that REACH is not by any means the sole regulatory requirement. In addition there is the EU's Classification, Labelling and Packaging (CLP) Regulation, implementing UN's Globally Harmonised System (GHS). Furthermore, the CLP Regulation has consequences for downstream legislation such as the Control of Major Accident Hazard Regulations and the hazardous waste regime, along with additional environmental legislation.

In addition, there are other regulatory regimes for chemicals – Biocidal Products Regulation (BPR) and Plant Protection Products (PPP) and Prior Informed Consent (PIC), which operate alongside REACH, some of these are dependent on the European Chemicals Agency to operate.

Without our own regulatory infrastructure with the resources and experience to implement these measures, the UK will probably have to strike a deal on retaining cooperative arrangement with the ECHA – and again there will be financial implications. The EU, at the very least, will be looking for full cost recovery, with a substantial contribution to its £100 million-plus annual budget.

Currently, responsibility is for regulating the chemical industry is split between the ECHA and Member States. The ECHA carries out completeness checks on submitted dossiers while in-depth checks are carried out by Member States depending upon national concerns.

On the ground, enforcement is carried out by the competent authorities of the individual Member States. Currently this is the Health and Safety Executive in the UK. Defra, however, reminds us that there is an appeal structure with the final authority lying with the European Commission. Therefore, after Brexit, the UK would need to set up a domestic appeal structure. Replication of this model in domestic bodies will require significant additional resource and potentially up-skilling of UK personnel.

As to the prospects for deregulation, even if we were not concerned to maintain the £25 billion in export value to the EU annually, the UK is also party in its own right to three United Nations multilateral environmental agreements (MEAs). These are the Stockholm, Rotterdam and Basel Conventions, which commit us to action on matters such as the regulation of Persistent Organic Pollutants. In addition, we are working towards ratifying the Minamata Convention on mercury.

As it stands, international agreements are implemented by EU law, which means that the EU law would either have to be re-enacted (via the Great Repeal Bill) or the UK would have to enact its own legislation.

Thus, by any measure, setting up a functional regulatory structure for the chemical industry is going to be a complex and expensive affair – to say nothing of time-consuming. To maintain current export levels, we are going to need the goodwill and active cooperation of the EU and, in the nature of things, those too will come at a price.

But the worst case scenario is that we lose up to £25 billion annually of high-value exports, with the added problem that exports sent to the continent are used as precursors for products which are then bought by UK enterprises. These inputs amount to about 15 percent of the value of the industry's total finished product exports, serving EU and global markets. Interruption of EU exports, therefore, would have a knock-on effect on our sales to the rest of the world.

On that basis, addressing the problems of the chemical industry merely in terms of difficulties with REACH vastly understate the problems. With the legacy media unable even to get that far – we have yet another situation where the public is being grossly misinformed about the complexities of Brexit.

Needless to say, if the UK elected to remain in the EEA, very few of these problems would arise, giving time for the UK to work with other nations on a global regulatory system to replace the EU measures.

Since so much environmental legislation is already agreed at global level, this should not be so very difficult to achieve, with the added advantage of providing a firm base on which to launch a genuine European Single Market, fully meshing with the global system.

When the Environmental Audit Committee gets round to completing its report, it will be interesting to see how much of this – if any – percolates the brains of one of the more dismal committees in the House of Commons. Likely, the MPs will compete with the fourth estate in the ignorance stakes, although we are always open to being pleasantly surprised.