In 2018, 60% of the UK's chemical products will be exported to the EU and 75% of its raw materials will come from the EU. A close relationship with the EU is crucial. The UK chemical industry needs frictionless, tax free trade, regulatory consistency and access to skilled personnel.
The chemical industry has repeatedly expressed no interest in brexit without an agreement. However, given the high probability that this will happen, market participants are preparing for the day when it will eventually become a reality.
After the end of the transition period on December 31, 2020, brexit will bring a series of challenges to the chemical industry.
A new era of trade
No agreement means that all exports to the 27 EU countries will be subject to tariffs. Tariffs on chemicals are expected to range from zero to 6.5%, averaging about 4%. British enterprises will no longer be able to enjoy preferential tariffs when exporting to some countries that have negotiated free trade agreements with the European Union.
One of the major challenges facing the chemical industry is the determination of rules of origin. Products and raw materials in chemical industry are usually stored, mixed, mixed and transformed on the basis of original raw materials. Once the UK leaves the EU, it will need to prove that it has not been used by other countries in order to obtain low tariffs to enter the EU 27 market.
The EU-27 is unlikely to allow the UK to import foreign goods, repackage them and sell them to the EU as if they originated in the UK. As a result, exporters will need to comply with EU rules of origin, which is both time-consuming and expensive.
Can the UK chemical industry enter the EU?
In the event of brexit without an agreement, the EU chemical registration, assessment, authorization and restriction (reach) will immediately cease to apply to the UK. After brexit, the UK's exports to the EU will still have to meet the reach standard, while its imports will be subject to the new UK legislation.
Chemical companies can provide the latest list of substances supplied in the UK and other parts of the EU, as well as the latest list of UK and EU importers. They can then determine the level of supply in the UK and the EU, respectively, to determine which substances need to be registered in one or both systems.
Among the non UK born EU employees, the proportion of professional scientific work is the highest, followed by contract workers and a small part of non professional labor force. Some companies expressed concern that replacing non UK professional workers would be a challenge.
Chemical companies must encourage their employees in the EU to apply for pre settlement or settlement status. They should also identify any potential skill gaps or shortages resulting from brexit, ensure that skills are in place within the company, and consider whether they can train and improve the skills of existing employees.
The future of the world after brexit
No agreement brexit seems to be the most likely outcome that chemical companies have to prepare for, and they resent the event. Its ultimate goal is to simplify its chemical and industrial decision-making.
However, the chemical supply chain is highly interdependent, so delays at the border will bring additional challenges, which translate into capital losses.
Only time will tell whether brexit is good or bad for the EU and the UK.