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UK Chemical Industry will be Badly Damaged by Brexit - Starting Now as Companies Plan to Reduce Future Supply Complications

Chemical IndustryIt is not just engineering which benefits from the free transit of products, parts and components along, often complex, international manufacturing and supply chains. The UK chemicals industry also relies on intermediate products and components being made in a succession of different countries. The import of goods for additional processing and subsequent re-export is common. Trade barriers of any kind - tariffs, duties, quotas, delays, bureaucracy - would be disastrous.

In particular the UK chemicals sector imports about two thirds of its intermediates from the EU and also feedstocks from the sophisticated chemicals infrastructure of mainland Europe. The tariffs on chemicals could be as high as 6.5% and in a tight industrial market this would be a significant competitive disadvantage.

Non-tariff barriers, however, may be even more damaging. With the UK becoming a third-country, companies could lose their right to self-certificate quality, quantity and specification for goods crossing the Channel. To have to do this on a shipment by shipment basis, possibly at the time and port of entry is certain to lead to delays and these might be lengthy and unpredictable. This is unacceptable in modern manufacturing businesses used to JIT deliveries and reliable supply chains.

Then there is the prospect of delays caused by even the slightest disruption to the transit of the 4.5 million lorries per year using the port of Dover and the Channel Tunnel.

Finally in becoming a third country the UK will lose its crucial rights to access REACH, the EU-wide product computerised chemical registration and production and use control system.

"Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) is a European Union regulation dating from 18 December 2006. REACH addresses the production and use of chemical substances, and their potential impacts on both human health and the environment. Its 849 pages took seven years to pass, and it has been described as the most complex legislation in the Union's history and the most important in 20 years. It is the strictest law to date regulating chemical substances and affects industries throughout the world. REACH entered into force on 1 June 2007, with a phased implementation over the next decade. The regulation also established the European Chemicals Agency, which manages the technical, scientific and administrative aspects of REACH." Wikipedia

If the UK becomes detached from REACH it will adversely affect its ability not only to trade in Europe but also in many other countries across the globe.

The nightmare situation, however, would be the "no-deal" scenario. This would be catastrophic and the industry can make no predictions regading such an outcome.

The chemical industry is one of the most imortant in the UK and mainly located in the north and in Scotland. Industry spokesmen can see "no compensatory positives to set against the list of negative factors for the industry as a whole." An editorial in January's Chemical World soberly concluded, "It is an inescapable conclusion that, as it stands, there is no credible model of a Brexit agreement that does not weaken the competitiveness of the UK chemical industry."

It would not be surprising if, across the world, but especially within EU27, some companies were not already drawing up plans to mitigate supply chain problems that might arise in post-Brexit Britain.