Fifty shades of Brexit

When singer/songwriter Paul Simon wrote ‘Fifty ways to leave your lover’, he would have had no idea that the European Chemical Industries Council (Cefic) would re-work it for its 2017 annual Chemical Congress in Vienna into ‘Fifty ways to leave the EU’. But as BBC TV’s Hardtalk interviewer, Stephen Sackur noted when introducing a discussion about Brexit: ‘I would like one way – it is a heck of a mess!’

Continuing trade is the key issue for the European chemical industry. But as an independent member of the EU Parliament, Julie Girling, told delegates: ‘In December, there will be an agreement to talk about trade.’ In return, she believes the UK will offer €50bn as the so-called divorce settlement.

A deal on citizens’ rights is almost done, and the EU will give in on concerns about the involvement of the European Court of Justice, she said. She believes the EU favours a trade agreement similar to that with Canada, adding: ‘This would be good for chemicals but bad for the financial sector’. One thing that will not happen quickly will be an agreement regarding the Northern Ireland border, which she thinks will take much longer than two years.

Regarding a two-year transition period after Brexit, Girling believes the UK government wants to be out of it before the next scheduled general election, while the EU wants it ‘for its own reasons’ – something many observers believe is due to the timing of the next EU budgetary period.

But as Sackur noted: ‘This doesn’t erase the image of a mess’, asking Girling if there are any real signs of a deal? ‘Many don’t believe Brexit will actually happen,’ he said.

In response, Girling said she believes that Brussels doesn’t understand the UK’s strategy and tactics, but also that ‘it is virtually unbelievable that the UK will change [its mind on departure]’. Even if the current government falls, and Labour takes over, it is unlikely to reverse the process, she said. However, if the UK stayed within the EU ‘there would be no upside – nothing would change’.

Charles Grant, director of the Centre for European reform, noted that there are some signs of changes in opinions in the UK, with more people joining the ‘don’t knows’. ‘Changing your mind is a big thing, and the change is coming from both sides,’ he added. He believes the EU has to ‘become a bit kinder’ if a satisfactory outcome is to be achieved.

Speaking for the chemical industry, Tony Bastock, CEO of Contract Chemicals and VP of Cefic, said that in terms of planning for Brexit, planning for a ‘no-deal’ scenario is the only thing that can be done as no-one knows what the final deal might be! He pointed out that for his company, 70% of its raw materials are imported and 60% of its products go to the EU, but many products actually go backwards and forwards between the UK and EU. Without a deal there would be a 6% tariff each way, so both UK and EU business would be damaged – ‘our growth is based on an integrated supply chain,’ Bastock emphasised. Unfortunately, in the absence of any clear guidance, his customers are already adding 6% to his prices in anticipation of a ‘no deal’ result, thereby having an impact on his competitiveness. ‘Being competitive is a basket of things,’ he said. ‘It is about the complete costs of manufacturing.’

Will the UK still be subject to EU regulations after Brexit? On this Bastock was very specific: ‘We have to be REACH compliant and REACH is developing in China and Korea, so we have to meet the regulations,’ he emphasised. He added, however, that REACH should be the responsibility of the consumer of the chemicals rather than the producer.

When asked by Sackur if the UK government is listening to the industry’s Brexit concerns, Bastock responded that the government is listening now, but not necessarily at the start. Chemicals are ‘the industry of industry – they get that now,’ he said. However, having spoken to the EU’s negotiator, Michel Bernier, he added that he was told there won’t be any sector deals.

That may not necessarily be the case, according to Grant, who believes the EU may soften, ‘but for a price – money and other things’. He also pointed out that a free trade deal generally does have separate deals within it. ‘It is inevitable that there will be sector deals,’ he stated.

It was difficult to say whether delegates had seen their confidence in an acceptable outcome to Brexit increase or decrease following the discussion. No doubt the discussions and arguments will continue up to, and probably beyond, a final agreement. In the meantime, Sackur concluded: ‘[the UK] continues to provide interest for the rest of the world.’