LONDON (ICIS)–There is little appetite among UK businesses for a “bonfire of regulations” post-Brexit, and deviation from EU chemicals legislation in the UK would lead to upheaval across the economy, the country’s trade group Confederation of British Industry (CBI) said this week.
An investigation by the UK-based private sector trade group into the potential for regulatory reform in different business sectors in the country post-Brexit revealed some scope for change, but these would be outweighed by the damage that would be incurred by sharp shifts to trading rules.
The report, carried out through consultations with businesses of different sizes across 23 industries in the UK, revealed little desire for significant changes to the way business is conducted in the country post-Brexit, according to the CBI.
“Businesses do not have the capacity to manage significant legislative changes at this moment in time and generally perceive EU regulation to be good regulation,” it said.
Little scope for chemicals reform
Of the sectors surveyed by the CBI, chemicals is one with the least room for reform, with convergence with EU rules “essential” not just for the industry but for the UK manufacturing sector in general.
The chemicals industry is one of the most regulated in the EU, with producers contending with evolving Reach legislation alongside hazardous chemicals, biocidal products and classification of labelling and packaging legislation (CLP) as well as a raft of other complex frameworks.
With UK and EU chemicals producers strongly interdependent through integrated supply chains, the scale of regulation imposed on the industry makes it difficult to reform rules for UK-based players without leaving them uncompliant with EU laws.
UK chemicals legislation will theoretically operate under the aegis of the Health and Safety Executive (HSE), but departure from the EU chemicals framework could force firms to re-register products with the regulator European Chemicals Agency (ECHA), resulting in years of expense and bureaucracy.
“Convergence with Reach is absolutely essential because if the UK leaves the EU and the transition period ends without negotiating convergence, any chemicals registered or sites authorised in the UK will become invalid in the eyes of the ECHA. This would create a regulatory no-man’s land,” the CBI said.
The UK chemicals sector is overwhelmingly made up of small and medium enterprises (SMEs), with 86% of firms employing 49 or fewer people.
Representatives of several small businesses have told ICIS that a ‘hard Brexit’ could represent an existential threat, rather than something that could be adapted to.
“We sell mixtures to EU customers, and right now those European companies don’t count as importers so don’t need to register under the Reach framework,” said a small Wales-based producer quoted in the CBI report.
“We face a huge risk that they’ll choose not to purchase our products anymore and pick European ones instead, to avoid the costs and complications of registrations,” it added.
UK government ministers have slowly grasped the importance of the chemicals sector to the country’s economy, and Prime Minister Theresa May singled out chemicals as an industry that may benefit from continuing EU alignment post-Brexit in a speech last month.
Following the agreement of a deal to retain the benefits and obligations of EU membership for 21 months after the anticipated March 2019 departure date, May is seen as keen to maintain regulatory alignment with the bloc, with Norway’s relationship with the EU a potential model.
However, she continues to face pressure from those in her party who want a cleaner break, and European Commission policymakers continue to express scepticism at the idea of the UK being able to pick and choose the parts of EU membership it wants and discard those it finds burdensome.
The CBI survey did reveal some sectors where there are opportunities for rules changes, including agriculture and tourism, and methods of improving regulation within current frameworks, including defence procurement and construction.
However, even sectors that may benefit may find improvements outweighed by the costs the UK business will face if smooth access to EU markets is disrupted.
Industries are becoming increasingly integrated, meaning that businesses do not easily fit into sectors, CBI said, noting that even the UK’s higher education sector had advocated that the country remain aligned with Reach legislation.
This trend of interconnectedness makes it more difficult to apply rules distinctly to one sector without risking disruption for others in the event that those reforms shift the alignment in that industry away from EU standards, CBI said.
Pictured: A pro-EU demonstration in London in January
Source: Guy Bell/REX/Shutterstock
Focus article by Tom Brown