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 has explained well why the industry is worried about this: sooner or later divergence leads to the problems that he and I have outlined.

Some 54.8% of cars produced in the UK are exported to the EU, so preferential access to the European market and avoiding regulatory divergence on chemicals is therefore extremely important. The automotive industry uses 13,000 chemical substances, only 1,181 of which are exclusively registered by UK companies. Many of the remaining 98,000 chemicals registered by the European REACH system could need to be re-registered in the UK. According to the Society of Motor Manufacturers and Traders, the cost to the automotive industry alone could be up to £1.3 billion. The Government have not denied those figures in their own analysis. The car industry is deeply concerned about the impact on its competitiveness and on the future of volume car manufacturing in the UK if we move away from a single European regulatory system.

UK REACH will either require access to the chemical testing data, as my hon. Friends mentioned, held by the European Chemicals Agency, or have to repeat and duplicate testing, hence the cost of registration for each substance, which I quoted earlier. Consortia of European companies own most of the data, and UK companies pay a fee for access to the data, which is held by the ECHA. Selling access to the data is a commercial decision not governed by EU data sharing rules.

The Health and Safety Executive, which is due to become the UK chemicals agency—perhaps the Minister can clarify when that will happen—will need to build its own database if it cannot access the ECHA database. According to the plans for UK REACH set out in the European Union (Withdrawal Agreement) Act 2020, basic data about the market and each substance will need to be submitted within 120 days of the end of transition, while full information appropriate to the registrant’s tonnage band will need to be submitted within two years. It took 10 years to build the ECHA database. How can that be replicated in two years, given that many companies will have to carry out testing from scratch and many importers are not specialists in the chemical industry?

Concerns have also been raised about the capacity of the HSE and the legal framework it will follow. It could either repeat the work of ECHA or rely on the work ECHA has carried out. The former would be hugely expensive, time consuming and dependent on a level of scientific expertise that may not be available. The latter could leave it open to challenge on the grounds that it should not be reliant on EU evidence and should have made its own assessment of risk. Either approach is potentially problematic.

An additional concern of the industry is that, as some registration of chemicals in REACH has relied on animal testing, a UK REACH would mean the introduction of animal testing—a point my hon. Friend the Member for Stretford and Urmston made earlier. Steve Elliot, the chief executive of the Chemical Industries Association, said

“The EU remains our biggest customer and supplier, so securing a tariff-free, frictionless free trade agreement is essential. Most crucially creating a parallel UK regulatory regime for chemicals, whilst still needing to meet the legal requirements of our biggest market place under EU REACH will, in our view, bring no commercial or environmental benefit and could put businesses and jobs at risk right across the country, including seeing a whole new programme of animal testing, something that none of us wants to happen.”

In a written answer on 4 February, the Under-Secretary of State for Environment, Food and Rural Affairs, Rebecca Pow, said that UK REACH will maintain the “aims and principles” of EU REACH. In the light of the industry’s importance, is that not an argument for staying part of the current system and avoiding the problems of implementing a separate version? In a recent British Coatings Federation members survey, 90% of members expressed their fear of having a duplicate set of chemical regulations through a UK REACH and all the extra bureaucracy and costs that would bring. The BCF said:

“We need government to understand the complexity of the integrated chemicals supply chain and come up with an appropriate free trade deal to prevent—or at least minimise—substantially added costs or disruption to our members.”

I place on record my thanks to the Chemical Industries Association, the British Coatings Federation, the Chemical Business Association, the Society of Motor Manufacturers and Traders, the ADS group, the CHEM Trust, BASF and multiple trade unions, as well as the specialists of the House of Commons Library. They have all helped with this complex, technically demanding subject. They have all helped confirm just how serious the issue is for our economy and for safety, too. I hope the Minister and her colleagues are listening to their advice.

Steve Elliott of the CIA said:

“The isolationist approach doesn’t work for us. I can’t think of a member company who isn’t exporting at least 50/60 per cent of its production.”

We have to remember that most of that exporting is into the EU. ADS gave me the example of potassium dichromate, which is a crucial chemical coating that protects aircraft structures from corroding. The example makes Mr Elliott’s case: there is no viable alternative to the use of that chemical in aircraft structures. It is produced in the UK and marketed in the EU. It is registered with REACH, so if the UK is removed from REACH, the registration would become non-existent and it would not be possible to import or sell it in the EU, to manufacture the mixture or to apply it to aerospace components. That would cause huge commercial damage to the aerospace industry in the UK and in the EU.

That story is repeated many times for UK-manufactured chemicals, so what is the plan for products like potassium dichromate and for aircraft manufacturing? What is the plan for the regions that rely on the chemical industry for their productivity? What is the plan for all other industries that rely on chemicals in their processes? What is the plan for multiple cross-border manufacturing supply chains? What is the plan for exports and imports, for safety, for data analysis, for testing and scientific expertise, including animal testing, for the creation of an alternative database, or for access to the existing ECHA database? What is the plan for capacity and expertise in the HSE? What is the plan for a sector deal? Tell us, Minister, what is the plan?