UK Chemical Industry: Regulatory Divergence

Part of the debate – in Westminster Hall at 4:29 pm on 26th February 2020.

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Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 4:29 pm, 26th February 2020

My hon. Friend is absolutely right. I have been told that estimated costs of between £50,000 and £100,000 per chemical are likely if a UK REACH system is introduced in the way the Government appear to be proposing. I will cover that in more detail as well.

The Government have made clear their opposition to regulatory alignment in general, and given that UK REACH is the default option, they appear to not want to make an exception for the chemical industry. The British Coatings Federation speaks of the practical and real problems that businesses will face with such a system. For example, REACH will continue to apply in Northern Ireland at the end of the transition period, even if a separate UK-based regime applies in the rest of the UK. It is not yet clear how that would work in practice. There is obvious concern that EU and UK REACH will, in theory, apply at the same time in Northern Ireland and will contradict each other.

Let me quantify my hon. Friend’s point. BASF employs 5,000 people in the UK. It estimates that it will have to find up to £70 million to re-register all existing lines. Its alternative is not to offer many of its smaller volume products in the UK, but many are critical to manufacturing. In the car industry, an average of 1,300 different chemicals are used in the production of each vehicle. If many of those products are not available in the UK, car manufacturers will have to import them; it will fall to car companies to register the chemicals and to develop the skills and facilities for storage. This would apply to all chemicals where usage volume was more than 1 tonne per year. Registration costs of £50,000 to £100,000 per chemical are likely to apply, as the Government have confirmed. At that cost, chemical companies would find it uneconomic to continue the production or import of many chemicals. Meanwhile, car producers would find it much harder to compete with EU-located production facilities in the manufacture of vehicles destined for the EU market.

The chemical industry exports 57% of UK-manufactured chemicals to the EU27. A UK manufacturer will have to register its products to comply with UK REACH, as they are made here, and also EU REACH if they are exported into the EU. If our regulations diverge, as the Prime Minister appears to favour, and as may be required as the price of a trade deal with the United States, manufacturers would need not only to demonstrate compliance with both sets of regulations but have two production lines—one to comply with UK regulations, the other for the EU’s. The alternative is to move production to the EU for the EU-compliant product, meaning a loss of exports and jobs from the UK.