A high-level policy conference set out how to safeguard the UK chemicals sector following the transition from the EU, minimising disruption and creating a regulatory system that provides short and long-term stability. Here’s what you need to know.
The arrival of a last minute Free Trade Agreement between the UK and the EU came as welcome relief to the UK chemical industry – the nation’s largest manufacturing exporter.
With a potential annual cost to businesses of at least £1bn, it’s no surprise that the industry had consistently called for the threat of tariffs to be avoided at all costs.
[Chemical manufacturing is the most research-intensive industrial sector and responsible for many of the innovations we rely on in almost every aspect of our daily life. Jonny Williamson recently put this vital sector under the microscope.]
Steve Elliot, Chief Executive of the Chemical Industries Association (CIA), was rightly concerned over the impact of a ‘no deal’ outcome for a trade intensive industry that sends almost two-thirds of its total exports to the EU.
In late 2020, he commented; “UK firms need [a deal] to ensure that they can continue to export on a competitive basis to our biggest market, without the huge disruption and cost that tariffs, border delays and duplicate regulatory requirements would all bring through a failure to agree a deal.”
In many areas, the trade agreement brings much needed, and valued, certainty. However, the UK’s decision to establish its own independent chemicals regulatory framework has raised as many eyebrows as it has questions.
Prior to 2021, if you were based in Great Britain and manufactured, imported, sold or distributed chemical substances or formulations, you had to follow the European Union’s flagship chemical control regulation: REACH.
The comprehensive Registration, Evaluation, Authorisation and Restriction of Chemicals framework covers the production and use of chemical substances, and their potential impacts on human health and the environment.
It has been described as the most complex legislation in the European Union’s history and is among the strictest laws to date regulating chemical substances. The regulation also established the European Chemicals Agency (ECHA), which manages the technical, scientific and administrative aspects of REACH.
From January 1, the UK brought in its own regime for regulation framework, referred to as ‘UK REACH’, bringing with it new or additional requirements.
Three weeks in and a clear forward strategy is yet to emerge, resulting in continued uncertainty over exactly how much cooperation there will be between the UK and EU. To diverge or not to diverge, that is the question.
On January 19, the Westminster Energy, Environment & Transport Forum (WEETF) held a policy conference to explore the next steps for the UK chemical industry and set out the priorities for UK REACH.
Key contributors included, among others, representatives from Defra, the Chemical Industries Association, the British Adhesives and Sealants Association, the Chemical Business Association, Bayer Crop Science, BASF and the Royal Society of Chemistry.
“The devil will be in the detail”
“Regulatory continuity” is the single biggest cost concern for both high value, low volume and low value, high volume chemical producers, according to the CIA’s Steve Elliot; who added that despite positive discussions between the UK and EU regarding this critical sector, access to REACH has been “conspicuous by its absence.”
Transposing REACH into UK law represents a number of practical challenges, Elliot continued, not least setting up future UK joint registrations and data sharing.
The Financial Times recently reported that replicating the EU REACH database (containing more than 23,000 unique substances and information from almost 102,000 dossiers) will cost the UK upwards of £1bn. Yet, this sum doesn’t account for the £500m already contributed by the UK over the past decade, noted Elliot.
Having to now duplicate work to build a UK database would set the nation’s chemical industry back by almost a decade at a time of increasing global competition and limited resources.
“This is a huge distraction,” noted Elliot, who is still struggling with “the illogicality of what we’re having to do.” He added that the £1bn would be much better invested in R&D and infrastructure to drive the government’s levelling up agenda and its net zero commitments – something the sector is incredibly well placed to help support.
Dr Richard Daniels, Director of the Health and Safety Executive’s Chemicals Regulation Division, noted that UK REACH created a number of opportunities, including independent regulatory decision making allowing the UK to regulate in a way that better suits its economy, and better alignment of operational delivery processes across regimes.
While the content and processes of REACH hasn’t immediately changed, he added, the processes behind those decisions will change. In particular, there are “gaps to fill” regarding governance and the regulatory framework.
Challenges include ensuring a cohesive UK market and the potential impact of taking different regulatory decisions to those taken by the EU. However, Daniels is hopeful that the phased approach being taken provides adequate time to address them.
“Reinventing the wheel”
Gabrielle Edwards, the Department for Environment, Food and Rural Affairs’ Deputy Director for Chemicals, Pesticides and Hazardous Waste, described the successful introduction of the Comply with UK REACH IT system, which went live on January 1.
Edwards highlighted the “smooth” launch and the largely positive feedback the system had so far garnered.
As explained by Defra, businesses are able to use the service to fulfil their transitional provisions and create new registrations, including to:
- Validate existing GB-held EU registrations (‘Grandfathering’)
- Submit downstream user import notifications (DUIN)
- Submit new substance registrations
- Submit new product and process orientated research and development (PPORD) notifications.
[A more detailed breakdown can be found on this dedicated gov.uk page]
Edwards doesn’t envision the UK diverging from the EU “just for the sake of it” and acknowledged that businesses needed clear guidance in order to make the transition as smooth as possible. She also acknowledged the additional administrative burden being placed on already stretched businesses.
Neil Hollis offered a perspective from the world’s largest chemical producer, BASF. With more than 3,000 dossiers and 2,000 substances, BASF is the largest company within EU REACH and sells approximately 8,000 products annually in the UK.
As the Regulatory Affairs Manager put it, the scale of work, cost and admin involved with duplicate registration requirements to access UK and EU markets will be “significant” and disproportionate relative to the UK’s market size.
Likely consequences include UK affected chemical supply chains becoming more expensive, resulting in the breadth of chemicals and suppliers available to UK users narrowing. It could also lead to reduced investment in the UK by the German multinational.
For chemicals legislation in the UK, BASF advocates “a fair and pragmatic regulation without lowering existing standards and recognises compliance made by supply chains with respect to EU REACH.”
According to Hollis this would lead to cost, bureaucracy and technical barriers to trade being kept to a minimum and the mitigation of concerns surrounding productivity, competitiveness and investment, among other outcomes.
Simon Tilling, a Partner at independent UK law firm Burges Salmon, also raised the issue of future investment in the UK, noting that the biggest barrier would be uncertainty over exactly what UK REACH is, how it will be implemented and whether further changes will happen down the line.
In terms of implementation, Tilling noted that the European Chemicals Agency (ECHA) operates on an annual budget of €110m and has a workforce of 600 people. Additionally, it is supported in its work by the relevant authorities in all member states, with workload divided between them.
If UK REACH is to handle a comparable workload, and all signs indicate that it will, then the Health & Safety Executive (HSE) has a much smaller team and budget with which to do it (reportedly £13m and around 50 people). It also won’t have anyone else to share that workload with.
Therefore, in Tilling’s mind, the most cost-effective option would be close co-operation with ECHA and the EU member states. It was a sentiment picked up by Chloe Alexander, a Trade Campaigner for the CHEM Trust charity, who succinctly described the solution as “convergence not divergence.”
Dr Julian Little arguably put it most clearly, “Given that chemical businesses are already subject to a high level of legislation and regulation, they need four things from UK REACH – simplicity, consistency, well-regulated and fairly regulated.”
All speakers agreed those were the critical factors, but clearly there is a huge amount of work to be done over the coming weeks and months in order to give businesses confidence that UK REACH is the right strategy to pursue and that a U-turn isn’t on the horizon. Especially if the UK chemical sector is to successfully overcome the challenges and grasp the opportunities of transitioning to a new regulatory framework.
If 2020 has taught industry one thing, it’s that responsiveness, agility and flexibility are key enablers of competitiveness and growth. The jury is still out on whether UK REACH will aid or hinder those efforts.
*Header image courtesy of Depositphotos, all other images courtesy of Shutterstock