UK chemical industry warns of £1bn cost to duplicate EU regime
Smaller companies may fail to survive move to a British safety registrations agency
The conical flasks in the Cornelius Group chemical factory in Suffolk are the size of space hoppers, each filled with a bubbling concoction that the company’s chief executive, Neville Prior, says is too secret to divulge.
The chemicals, which are used to make contact lenses, are highly volatile but for Mr Prior it is the bureaucratic blowback for his industry from the impact of Brexit next January that keeps him awake at night.
From January 1 the safety registrations of the chemicals Mr Prior uses to make his products — currently held in the Reach registration database run by the European Chemicals Agency (Echa) in Helsinki — will need to be re-registered with a new UK equivalent.
For Cornelius Group, with 200 employees and turnover of about £50m a year, Mr Prior said registering some 2,000 chemicals within the two-year government deadline represents a costly bureaucratic marathon for no gain.
Registering a single chemical in the new UK Reach database could cost up to £300,000 if companies are required to buy “letters of access” to use the vast banks of test data held by Echa — information that is expensive to produce and often owned by third parties. Even then, additional testing may be required.
Steve Elliott, chief executive of the Chemical Industries Association, said that unless a data-sharing deal was done with Brussels the new system would add more than £1bn in costs to companies, just to duplicate existing registrations.
To make matters more complex, Mr Prior, like other medium-sized business owners, has still not seen the computer software that the Health and Safety Executive will use to collect the new UK registrations.
“The real question is how do you get hold of the registration data, which is held in commercial agreements,” he said. “It’s unclear and we’re getting closer and closer to the time when Brexit is going to happen.”
The decision to create a costly copy of the EU Reach database flows from prime minister Boris Johnson ruling out seeking associate membership of Echa as part of his “clean break” Brexit.
The chemicals industry is not alone in facing costs of duplicating existing EU standards regimes after the end of the Brexit transition period. Manufacturers have warned of the costs of a new UK Conformity Assessed quality standard that ministers say will replace the existing CE mark from next year.
In a letter to MPs in May, Rebecca Pow, the minister at the Department for Environment, Food and Rural Affairs overseeing the policy, admitted there would be “significant cost and burden to industry” in complying with UK Reach, but argued that the “benefits of having control of our own laws outweigh the costs”.
That is not a view shared by Dani Loughran, managing director of Aston Chemicals in Aylesbury, another medium-sized business that imports and distributes chemicals used by some of the world’s leading cosmetics brands.
Aston sells about a thousand different products, many of which will require a new UK registration and the company and its suppliers may have to commission fresh testing to duplicate the Echa data.
Even without new testing, the basic cost of registering each chemical will be about £5,000, with the additional cost of “letters of access” varying from £33,000 for an emollient used in a face cream, for example, to £150,000 for a shea butter used as a base for sunscreen. In one case a letter of access cost nearly £300,000.
“Our EU competitors are licking their lips, and that is deeply frustrating,” Ms Loughran said of the mounting costs. “We’ve spent 30 years growing from nothing, now all these barriers are being forced upon us.
“It is enormously wasteful and uncompetitive for UK companies like us to have to spend time, money and resources to repeat all of these registrations for no additional benefit to anyone.”
Both Ms Loughran and Mr Prior also had doubts that UK Reach would have the bureaucratic bandwidth to manage the new processes. Echa employs 600 people with an annual budget of €110m, compared with the £13m a year budgeted for the UK version, including up to 50 staff.
Crucial to shrinking the new registration costs for UK companies — by up to 80 per cent according to Chemical Business Association chief Peter Newport — will be whether British negotiators can broker a data-sharing agreement between Echa and the UK authorities to remove the need for the letters of access.
“Basically the EU has a pantry in Helsinki stuffed full of goodies, and we now want to populate the UK’s new pantry with that data,” Mr Newport said.
He added that there were widespread concerns in the industry that the cost of UK registration risked making some chemicals commercially non-viable in the UK market, with knock-on effects for supply chains and UK jobs.
The request for a data-sharing agreement is supported by both the European Chemical Industry Council and the Chemical Industries Association. But EU officials are cautious about the prospects for such a deal.
The UK’s draft agreement seeks to conclude a data-sharing deal by the end of 2021, but in her letter to MPs Ms Pow conceded that “businesses may find it difficult to obtain the necessary data”.
Defra added: “We have already legislated to ensure existing EU Reach registrations held by UK businesses will be carried over, and continue to look at ways in which we can further support them during this period.”
But the need to register with UK Reach remains, creating a burden even for big players such as the German chemical maker BASF, which has 10 small plants in the UK, each employing about 100 people.
Geoff Mackey, corporate affairs director at BASF, said the company had about 1,200 substances to register and had calculated the combined cost would be around £60m-£70m, all with “no added value to the company’s business and not enhancing human safety or environmental protection in any way”.
Businesses like BASF, and even Cornelius Group, should be able to absorb costs and adapt but Mr Newport said some might not survive the regulatory storm.
“We’re very, very concerned,” he said. “Bigger global and pan-EU companies will survive this, but a lot of smaller and micro companies that are already exhausted by Covid-19 may very well not.”