09.07.2018
The prospect of a “no deal” Brexit has given rise to media reports of essential supply chain disruption and fears that a collapse in negotiations could leave the UK without medicines and food. Manufacturers, have their own well publicised “no deal” woes including lorries stacked up with parts and goods and staff unable to travel.
A less well known but significant issue is the invalidation of thousands of UK-held registrations under the EU REACH chemicals regulatory framework. This could prevent the supply of substances essential for many EU, UK and pan-European supply chains. Consequently, EEF members could experience major disruption to their businesses. A further related problem, is the potential invalidation of authorisations, relied upon by some manufacturers to use particular substances deemed to be ‘of very high concern.
Sunk Costs
Introduced in 2007, REACH is the system that regulates the safe use of chemical substances placed on the EU market. It requires businesses to assess and register chemicals with the European Chemicals Agency (ECHA) which receives and evaluates registration dossiers and generally acts as a coordinator for REACH processes. It also has expert committees advising on future controls under REACH. A “no deal” scenario could mean the UK, which currently has a role in this process can no longer maintain its presence on committees.
The end of May this year marked a significant milestone for REACH as the deadline passed for registering existing substances on the market since 2007. ECHA now holds data on 21,551 substances which has only been achieved because of enormous effort and expense.
Many in industry are concerned that the significant financial investment and hard work by them and their suppliers could go to waste. Moreover, an alternative parallel system could be complex and potentially expensive. The overall feeling is that while there could be some winners, on balance the cost of regulatory compliance would significantly outweigh the benefit of divergence.
Associate membership?
In March this year, the Prime Minister appeared to recognise this and suggested the Government would seek “associate membership” of ECHA amongst other EU agencies. The concept of “associate membership” is unprecedented and recent comments from the EU’s negotiating team suggest this may not be achievable. If some form of “associate membership” were achieved through the negotiations, it is not yet clear which obligations and responsibilities the UK would undertake as part of any final arrangement. Nonetheless, this could mean that some progress is being made, opening up more options for the UK’s future with the EU chemicals regime. As a result, we have been talking to our members about what they want from “associate membership” and the key issue is that trade across the new UK-EU27 border is not interrupted, or in the longer term, costs increased by regulatory complexity. See our paper here for more details.
Planning for all eventualities
Overall, perhaps it is easier to imagine a “UK REACH” rather than the UK being allowed to select parts of the EU regulatory framework without accepting the jurisdiction of the European Court of Justice. Additionally, the potential for a continued role in decision making processes could be an important element to minimising the long-term risk of EU policy taking an undesirable direction. Whatever system emerges from the negotiations, it will require regular checks via some kind of bi-lateral joint committee between the EU and UK with the potential for the UK to opt-out over time.
All of this is of course subject to the outcome of negotiations and in the meantime, manufacturers are trying to deal with very limited certainty or even basic advice on planning for the future. Government should therefore keep businesses in the loop as the negotiations progress and prioritise a workable plan to protect trade in case of a “no deal” scenario. Either way, businesses would also do well to start looking at their supply chains and mapping potential issues.