Peter Newport, Chief Executive of the Chemical Business Association (CBA) reviews Brexit and the uncertainties faced by the UK chemical industry.
For the last three years, it has felt like the UK has been trapped in Act 3 of Hamlet. Leave or Remain? Deal or No Deal? Backstop or no Backstop? To be, or not to be? The profound uncertainty at the heart of that play has been shared by the UK’s chemical industry and, worryingly, definitive answers remain a distant prospect.
In countless meetings with Ministers and officials, organisations such as CBA, have highlighted this damaging uncertainty. As the result of the continuing political impasse, businesses have implemented contingency plans – to protect themselves and ensure that they can continue to supply products to their customers.
The political impasse of the last three years has resulted in a significant number of supply chain companies creating subsidiaries in EU member states – with premises and employees – a permanent loss to the UK exchequer and to UK employment. In moves that share much the same consequences, other companies have transferred key products to EU-based companies to guarantee continued regulatory compliance and market access. Similarly, we are aware of European-owned chemical companies repatriating products.
Here are the key issues for the UK’s chemical industry.
The UK chemical supply chain supplies chemicals to thousands of UK manufacturing and service businesses. It is the key link in an integrated and highly regulated supply chain that has become increasingly sophisticated during the forty years that the UK has been a member of the EU.
The industry’s regulatory framework has a distinctive relationship with trade. Compliance is the key to market access. In terms of Brexit, the EU alone determines the nature and extent of the compliance required for products entering its markets (the destination of 60% of the UK’s chemical exports). Its requirements are non-negotiable. Failure to comply is a barrier to market access. Without market access there can be no trade. UK businesses were promised ‘frictionless access’ to EU markets. To date, there is little or no evidence that this is a realistic prospect.
CBA has repeatedly advised Ministers and officials that a blanket transposition of EU REACH into UK law represented by the REACH Statutory Instrument is unworkable, unrealistic in terms of timescale, costly, and is almost certain to result in higher levels of animal testing.
Testing Data – To function, UK REACH requires a database of registered chemicals similar to that held by the European Chemicals Agency (ECHA). This requires access to the chemical testing data summaries, assessments, and reports used to support the registration of substances under EU REACH.
Most UK companies do not own or have access to this data. They pay a fee to its owner(s) for Letters of Access generating an electronic token that enables the company to rely on the data set held by ECHA (but only for EU markets).
The majority of chemical testing data is owned by consortia of European companies – not by UK businesses. CBA survey evidence confirms that 75% of test data is overseas owned. Selling access to this data to the UK as a third country remains a commercial decision for its current owner(s) and will not be governed by the EU’s data-sharing rules. There is anecdotal evidence that some EU-based chemical manufacturers will not make their data available, as the UK market is too small to be of economic interest.
A CBA Solution
CBA has proposed a solution that will make UK REACH workable by solving the crucial issue of access to testing data. It would also ensure that UK companies have continued frictionless access to the EU market post-Brexit as well as EU companies enjoying a similar level of access to the UK Market.
CBA has proposed that European Substance Information Exchange Forums (SIEFs), holding the majority of chemical test data supporting EU REACH registrations, are allowed to submit a full registration dossier to the UK’s Health & Safety Executive.
This would apply equally to lead registrants and SIEFs whether they are based in the EU or the UK. CBA has recommended that this process is free of charge.
This proposal solves two problems. Companies registering substances under UK REACH that do not own or have access to testing data can rely on the same testing data that supports their EU REACH registrations. It also means that the IT system’s data content underpinning both the UK and EU regulatory systems are identical therefore ensuring continued and consistent high standards of chemical safety.
New UK REACH registrants would notify the HSE and be directed to the European SIEF to obtain access to the data package in the same way as EU REACH currently operates. If a European SIEF elected to perform new tests or gather further data, they would then update both ECHA (EU REACH) and HSE (UK REACH), so ensuring future consistency.
A further benefit of this approach is that the UK should be able to complete the registrations for the substances within the two-year timescale proposed by the Government. We believe this timescale is impractical without adopting a solution of this kind.
Animal Testing – If existing test data is unavailable, or permission for its use cannot be secured, a significant amount of animal testing would be required to recreate acceptable standards of data. Alternative forms of testing may be available, but higher levels of animal testing are inevitable and will be a direct consequence of the UK Government failing to resolve the test data issue. Additional animal testing contradicts the previously stated policies of EU REACH and UK Government.
Cost – The cost of establishing UK REACH is considerable. UK firms now hold over 12,000 EU REACH registrations covering almost 6,000 chemical substances. The registration fees and data-sharing contributions funding this process total many millions of pounds. UK firms simply cannot afford the further costs of creating a stand-alone UK REACH regime
Timescale – The two-year target for the UK REACH to acquire all the relevant testing data on UK products is unrealistic. To put the UK Government’s target into context, the EU’s REACH regime took ten years to implement – from 2008 when pre-registration began to the final REACH deadline in 2018.
As we all know, in business some things are urgent; other things are important. But very few issues are simultaneously urgent and important. For the continued growth of the UK’s chemical sector and the downstream sectors it supports, Brexit and the questions it raises is an exception to this rule. The industry awaits definitive answers. It is a consummation devoutly to be wished.