WHILE the UK Government has lauded its eleventh-hour agreement with the EU for a zero-tariff, zero-quota trade deal, businesses and industry groups have warned about a raft of issues that require further negotiation and clarification, and about new, costly administrative burdens that are impacting businesses and remapping supply chains.
On 24 December, in the wake of news that the EU and UK had avoided a no-deal Brexit, there was a wave of relief that importers and exporters would avoid tariffs. Trade group Make UK said a no-deal outcome would have caused catastrophic damage to manufacturing in Britain. The Chemical Industry Association (CIA) estimated it would have hit the sector with an extra £1bn in annual costs.
But relief quickly passed to concern: “Today’s vote [to pass the deal] finally ends more than four years of uncertainty and dispute, during which investment has ground to a halt,” said Make UK CEO Stephen Phipson. “However, businesses must now manage their way through one of the biggest changes to trade ever seen, which takes effect in just 48 hours. There will be new customs paperwork, arrangements at the border and significant additional red tape.”
Phipson said the UK Government must move quickly and work with both UK business and EU partners “to address a wide range of issues such as rules of origin, recognition of professional qualifications and chemical registration systems where the new arrangements are likely to be most challenging”.
New administrative burdens for those trading across the English Channel include completing customs declarations and providing details on supply chains to avoid tariffs under rules of origin obligations. This extra cost of compliance will erode competitiveness for the UK chemicals sector which relies on the EU for 60% of its exports. It is a risk to low-margin chemicals trade and it is already reshaping UK-EU supply chains.
In January, Aston Chemicals, a medium-sized chemicals importer and distributor said it had ceased exporting to the EU from the UK. To avoid extra costs, it has separated its supply chains, using a subsidiary in Poland for its EU distribution while reducing UK warehousing staff, the Financial Times reported.
Robinson Brothers, a manufacturer and exporter of fine chemicals and rubber accelerators that employs 300 people in the UK, told The Chemical Engineer that the most noticeable impacts since the deal passed are delays at ports and having to complete additional documentation.
“There has been a significant increase in red tape and cost,” said Adrian Hanrahan, Managing Director of Robinson Brothers. “This provides zero benefit to our employees, our company, our customers or UK PLC but is a great potential benefit to our competitors in the EU who do not have these same costs.”
Hanrahan is thankful that many customers have remained loyal, though he has noticed uncertainty among others, and said some potential business has been lost to EU competitors.
“And I have not talked about the opportunity costs. We could be using the cash tied up in these new burdens to add value within the business, not detract value.”
Out of reach
One of the key concerns in the lead up to and in the wake of the deal is how the UK will regulate chemicals. There had been calls from industry and environmental groups that in the interests of environmental protection and cost savings the UK should negotiate an agreement to remain wedded to the EU REACH chemicals regulation.
Instead, the UK opted to create a shadow UK REACH, requiring chemicals companies to duplicate their efforts to work in both markets. UK companies seeking to sell into the EU had to transfer their REACH registrations to the EU by 31 December. In January, the European Chemical Agency (ECHA) said 20% of registrations in the UK had not been transferred and will be revoked.
The Chemical Engineer, 28 January 2021