Brexit reality hits U.K. chemical companies

The U.K.’s pharmaceutical and chemical sectors say they are increasingly concerned about lack of progress as politicians negotiate the terms of the U.K.’s exit—or Brexit—from the European Union in March 2019.

The U.K.’s Chemical Industries Association (CIA) and the European Chemical Industry Council (Cefic) say Brexit could significantly compromise the chemical sector and damage trade.

A key industry worry is that companies won’t have time to put new business processes in place ahead of the U.K.’s exit from the EU. “We call on negotiators on both sides to make rapid progress,” says Stephen Elliott, CIA’s chief executive.

In a joint statement, CIA and Cefic set out a series of conditions they say politicians must meet if the chemical sector is to avoid being hobbled by Brexit-related costs and logistics problems.

“Considering that cross-channel chemical trade amounts to over $46 billion and given the close interconnection of supply chains, we are very concerned about Brexit causing disruption of chemical markets,” says Cefic’s director general, Marco Mensink.

Compounding the problem is the unwillingness of U.K. politicians to be specific about what must be done once the U.K. has left, says Paul Hodges, chair of the London-based consulting firm International eChem. Hodges, formerly a senior manager with the one-time British giant Imperial Chemical Industries, recalls the complexity of exporting chemicals from the U.K. to Europe before a single EU market was created.

Post-Brexit exports will involve customs and tax systems that will take time to establish, Hodges explains. “I think we are getting close to the point where it is too late,” he says. Among the anticipated changes under World Trade Organization rules, companies will be expected to pay a key tax up front rather than after transactions. Hodges says he knows of one chemical company that must have hundreds of millions of dollars available as a result.

Together, the U.K.’s chemical and pharmaceutical sectors export $35 billion of manufactured products annually, making them the country’s largest goods exporter. Some 75% of their raw materials are sourced from the EU.

For its part, the U.K. drug industry is contending with the European Commission’s recent decision to relocate the European Medicines Agency, the European equivalent of the U.S. Food & Drug Administration, from London to Amsterdam. The agency will relocate within 16 months.

The decision “means 1,000 high-quality jobs leaving the U.K.,” says Steve Bates, chief executive officer of the BioIndustry Association, a U.K. trade group.

The U.K. has yet to decide under what mechanisms drugs will be approved in the U.K. and sold to the 27 EU countries after Brexit. “We must now ensure Brexit does not disrupt the safe supply of vital medicines to tens of millions of families in the EU 27 and the U.K.,” Bates says. “Businesses now need certainty.”

But uncertainty is spreading, notably around the talent pool that will be available to U.K. drug and chemical companies after Brexit.

The U.K. trade union Prospect surveyed 650 science, technology, engineering, and math workers from the EU and the wider European Economic Area; it found that almost 70% are considering leaving the U.K. because of Brexit. This is up from 11% in March.