CEO Blog

In the UK there are something like 3,000 businesses who make chemicals - businesses whose products and solutions are integral to something like 96% of all manufactured goods.  Whether it is ingredients for food and medicines; paints and coatings for cars and planes or materials for mobile phones and electric vehicle batteries, the chemical industry is truly the “industry of industries” – also playing a critical role in the nation’s response to COVID-19 through its supply of hand sanitiser, PPE and vaccine ingredients.

Chemical businesses are located throughout the UK, with many of them clustered together in the North East of England, North West of England and Central Scotland. These factories and laboratories, operated by a highly trained and skilled workforce, make a significant contribution towards the UK’s productivity performance – double that of any other manufacturing industry and triple that of any part of the UK economy.  Such a performance sees chemical workers typically earning 35% more than other manufacturing industries and 54% more than the average worker.  From Runcorn in the west to the Humber Bridge in the east; from Teesside in the north east to Grangemouth in Scotland,  chemical businesses and their employees are essential to the Government’s levelling-up agenda.

The Brexit agreement with the EU is more than important. However, in offering our congratulations to both parties for securing a deal, there does remain one further crucial element that has not been resolved. Safety is the most important aspect of any chemical business, with chemical plants and products presenting minimal risk to the health of their employees and the wider public as well as to the environment for local communities and wider society.  Every responsible chemical business recognises this and adopts and follows the highest standards to protect people and the environment.  Doing this is not just a matter of respecting the law, but also a reflection of a healthy culture and leadership which, in turn, helps drive successful commercial outcomes.  Workers and consumers have to be protected.

Back in the late 1990s, chemical businesses in EU member states (including the UK) first developed, with the European Commission and Parliament, an all-embracing regulatory framework ensuring that chemicals would have to be Registered and potentially Evaluated and Authorised under the REACH regulation to enable their placing on the EU market.  This regulation is complex and far-reaching, and has involved a decade’s worth of significant investment by chemical companies in generating, sharing and submitting substance-specific data to the European Chemicals Agency (ECHA) in Helsinki.   

Unfortunately, although the UK and EU were able to agree on a chemicals annex as part of the trade deal, this annex focuses more on the potential for future collaboration and “facilitation of non-confidential information exchanges”.  It does not include the possibility of the UK government accessing EU REACH data for the purposes of informing its own future chemicals regulatory regime – UK REACH – despite the fact that UK businesses have been the second largest contributor to that data set, after German chemical companies. 

Such an outcome leaves UK chemical companies with not only the ongoing need to respond to the requirements of EU REACH if they are to retain their EU market interests, but also to reproduce duplicate data for UK REACH purposes – a potential cost of over £1 billion that will provide very little, if any, additional health or environmental benefit and divert significant amounts of expenditure that could be better spent in future capital and R&D investment. 

We do of course welcome the UK Government’s commitment to stretch out the UK REACH compliance deadlines to as much as 6 years and we also welcome the Prime Minister’s recent comments suggesting future regulatory flexibility for the UK chemical industry following confirmation of the trade deal.  However, in encouraging our politicians to support this deal and provide some much needed certainty for business at such a difficult time, I would also urge them to do all they can to ensure that the UK Government and, where appropriate, the EU, urgently address our REACH data access concerns so that the chemical industry can play its full part in driving growth and prosperity across the country. A divergence of regulation that creates dual regimes provides investment challenges.          

The chemical sector is trade intensive.  The majority of its output is exported, with the largest share by far – 60% of its total exports – destined for member states of the European Union in the form of German car makers, French cosmetic companies, Italian agricultural businesses etc. The new treaty, negotiated between the UK and the European Union is therefore very reassuring on one level in that a zero tariff, zero quota agreement has been struck, meaning that a potential £1bn cost to the industry has been avoided.  What looks like a supportive and, hopefully user-friendly, rules of origin regime should also incentivise UK businesses to apply for tariff relief where appropriate, rather than give up and simply pay a duty, is also very helpful.

Combine the agreement over tariffs and related rules of origin, with what looks like the potential for the UK’s continued participation in EU  programmes such as Horizon Europe until 2027 – a key collaborative R&D funding programme that UK chemical businesses have been key beneficiaries of over the years – and you could be forgiven for thinking that the deal represents good business for the chemical industry, but we need this omission sorting quickly.    

Steve Elliott, CIA Chief Executive

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