The firm Teal & Mackrill in the port city of Hull in the north east of England has been making paints for almost a century for special applications, such as fishing trawlers and factory floors. It produces marine paint, for example, with ingredients to prevent pickups from enveloping skirts.
In a slightly noticeable consequence of the new Brexit trade deal, the company has real concerns about its future. Geoff Mackrill, the third member of his family to run the company, said increasing UK regulatory burdens on chemicals could mean he could not eventually get the additives that make his paint characteristic.
“The concern is that some of the materials we use may not be available because of these costs.”
This is a concern that is spread annually over Britain’s £ 33 billion (or about $ 45 billion) a year.
Prime Minister Boris Johnson, when announcing the trade agreement on December 24, said Britain would now be free “to set our own standards, to innovate the way we want.” Business people like Mr. Mackrill was relieved that Britain had avoided a chaotic exodus and that goods manufactured in Britain could remain free to move to Europe.
But some companies, especially in the chemical industry, find that things have become more complicated rather than easier. The extensive and heavy regulations of the European Union may no longer apply in Britain, but it remains a fact for British companies such as Mr. Mackrill, who want to sell their goods in Europe.
The British government is also creating its own demanding set of chemical regulations, a reflection of EU laws. An industry group said the cost to chemicals companies of recreating European regulations, which require extensive documentation, could amount to as much as £ 1 billion, which could potentially be a major burden for small businesses and those with low earnings margins. .
The regulatory changes, plus the fact that chemicals may have long supply chains, have led some businesses to reconsider their activities in Britain.
Before the Brexit, Aston Chemicals, a firm in Aylesbury, about 50 km north-west of London, imported chemicals from around the world, did the necessary paperwork, paid any import duties and then shipped them to European manufacturers of moisturizers or flakes. shampoo.
Dani Loughran, managing director of the company, said the use of Britain as a hub ‘worked incredibly well’. But after the Brexit it does not.
Trucks in Britain on their way to Europe now have lengthy customs procedures at the border. And while goods manufactured by the British can still enter the European Union tax-free, this is not the case for goods that originated elsewhere.
An importer like Aston Chemicals must therefore pay tariffs on products manufactured in the United States or Asia, and then again if they are distributed to the European Union, which effectively doubles the tariffs, Ms. Loughran said.
As a result, the company would now rather deliver Europe from a base in Poland, a member of the European Union. This has reduced its UK warehouse staff from three to one.
These new obstacles are not just a draw for the chemical industry.
“I think everyone who uses the UK as a distribution center for Europe will be affected in the same way,” she said. Loughran said. They ‘are going to find it very difficult in future’.
The move will mean that Loughran’s British arm will mainly supply the local market, but even in the outlook there will be a regulatory cloud.
She is used to working with the European Union’s chemical regulation system, known as REACH, which has a reputation for being strict. Companies are expected to submit long files on each chemical substance they supply within the European Union, with their properties and uses as well as the potential risks and dangers to the European Chemicals Agency, in Helsinki. Mrs. Loughran said REACH was a headache, which we feared and cursed, but at least it covered the entire trading bloc including Britain.
But the chemical industry had hoped that Britain and the European Union, after Brexit, would continue to share data submitted under REACH, but that the language did not make it into December’s agreement.
Companies now face the prospect of making voluminous and largely duplicate files on the chemicals they want to sell in Britain with a newly formed UK agency, UK REACH. According to estimates by the Chemical Industries Association, a British trading body, the money required and the work required for the reconstruction of data on product safety and other matters can be expected to take several years, £ 1 billion.
A company cannot simply cut and paste declarations and files previously submitted to the European regulator, because in many cases the documents are full of commercially sensitive intellectual property belonging to other companies.
Stephen Elliott, chief operating officer of the industry group, said chemical companies operating in Britain could be forced to repeat the submissions they had already made to the European regulator almost ‘word for word’.
“This is a senseless use of resources,” he said.
Mr. Elliott said the industry has continued to urge the government to agree to accept the applications it has already submitted under REACH, but said that this result seems to be of high order at this stage due to the aversion to the government to rely on Europe. regulation.
CEOs say it makes little sense for chemical companies to incur similar regulatory costs as those of the European Union to sell products in Britain, whose economy is about one-seventh the size of the European Union. Operations managers also doubt that the British Chemicals Agency will have sufficient staff and resources to meet its European counterpart, which employs around 600 people.
“The combination of Brexit and UK REACH regulations is not very useful when companies are considering investing in new investments,” said Paul Hodges, chairman of New Normal Consulting, a company that focuses on chemicals. In other words, new investments can go differently.
The weakening of the chemical industry in Britain would be a blow to the economy after Brexit. Chemicals may not be as visible as some other industries, but these substances are integral to a wide range of products, including motors and shampoos. It is a large enterprise in Britain that accounts for a solid 9 per cent of exports, with almost 60 per cent going to the European Union, and according to government statistics employing around 94,000 people.
One concern is that businesses will decide that it is no longer worthwhile to offer chemicals that earn low profit margins or sell in small quantities, such as the ingredients that Mackrill buys for its paint. So far, industry leaders are following a wait-and-see approach, though they are looking askance at new red tape and costs in Britain.
BASF, the German chemical giant, which sells about 1,200 substances in Britain, estimates that UK REACH could cost the company £ 70 million.
“If the cost of bringing products to the UK market rises to make it uneconomical, we are not going to do it and make a loss,” said Geoff Mackey, director of communications and sustainability at BASF in the UK.
However, smaller UK companies are likely to feel the impact. If they want to continue to be serious players, they must sell to Europe and stay in line with European regulations.
Mr. Mackrill already feels compelled to set up a business in the Netherlands to comply with European Union rules, to which he ships about 10 percent of his products. He also has up to two people working full time on the regulatory implications of Brexit, which exploits the resources of a company with 70 employees.
Mackrill, who is currently executive chairman of his company, seems confident that a company that has existed since the early 20th century can navigate through the Brexit gaps, but he says others may judge that the easiest way is to move their operations to the giant market next door.
‘Some manufacturers will probably look at it and go:’ Why do we not manufacture it in Europe? ‘, The mr. Mackrill said. “This is not good for UK PLC,” he said, referring to British affairs.