On 23 August 2018, the UK Government began publishing technical notes on the effect of a no-deal Brexit. These notes are intended to provide guidance to citizens, businesses, public sector bodies and Non-Governmental Organisations in the United Kingdom on how to prepare for the possibility of the UK leaving the EU next March without concluding a Withdrawal Agreement. SPICe Spotlight is providing analysis and comparative information on a number of the notices. The first blog provided an overview of the UK Government’s Preparations for a no-deal Brexit.
This blog covers the UK Government’s no-deal technical notice on Regulating chemicals (REACH). Other notices relating to chemicals will be the subject of a future post.
Chemical industry in Scotland
Industrially-produced chemicals form an important industry, and chemical feedstocks are vital to the products and conveniences of the wider economy and modern society.
Scotland has over 200 chemicals companies which export more than £4 billion a year and directly employ 10,000 people, according to the industry-body Chemical Sciences Scotland. Office of National Statistics figures show more than 5,000 people were directly employed in chemical manufacturing in Scotland in 2017.
Europe is an important market for the chemicals sector. At a UK level in 2017, 61% of UK chemical product exports went to other EU countries, and 73% of UK chemical product imports came from other EU countries.
How are chemicals regulated?
The manufacture, use and trade in chemical products is regulated across all EU and European Economic Area (EEA) countries by directly-applicable European law. The central piece of legislation is called REACH, (Registration, Evaluation, Authorisation and Restriction of Chemicals).
Under REACH, companies who manufacture or import chemicals into the EU are required to register substantial information on hazards and risk management measures to demonstrate how that substance can be safely used. Substances can be banned if their risks are unmanageable and specific uses can be banned or subject to prior authorisation.
The European Chemicals Agency (ECHA) is the lead body implementing the framework. Its role is to receive and evaluate the information provided by companies, and in some cases deliver the technical, scientific and administrative work. The Health and Safety Executive (HSE) is the UK’s national authority. The HSE also enforces the rules in Scotland, along with the Scottish Environment Protection Agency (SEPA) and local authorities.
More information is available in the House of Commons Library note on Brexit and chemicals regulation.
What will happen in a no-deal Brexit?
According to the UK Government’s no-deal notice, a no-deal scenario has significant implications for the chemicals industry.
Access to the single market will be restricted
The UK Government’s notice indicates that:
Companies registered with REACH would no longer be able to sell into the EEA market without transferring their registrations to an EEA-based organisation… or developing a new working relationship with their EEA customers.
The “new working relationship” as quoted, refers to the fact that REACH registrations can be made by importers to the EU, rather than the manufacturer. However, this arrangement may increase the difficulty and cost of EEA companies buying chemicals from UK companies and can only begin after Brexit.
A new domestic system of chemical regulation will be required
The notice indicates that the UK Government would:
establish a UK regulatory framework and build domestic capacity to deliver the functions currently performed by the ECHA.
The notice also indicates that this new domestic system would require:
- a new IT system,
- specialist capacity to evaluate the impact of chemicals on health and the environment,
- regulatory and enforcement capacity in the HSE and other regulators, and
- policy function in Defra and the devolved administrations.
To allow companies to continue to place products on the UK market, the UK Government plan to “carry across” existing registrations and authorisations held by UK companies. Within two years, companies would be required to re-submit the information that supported their original EU registration. However, concerns exist that this may be complex and costly for some companies.
Devolution aspects
Any UK-wide framework for chemical regulation would intersect with the devolved competencies of the Scottish Parliament. The UK Government has identified chemicals regulation as an area of policy where legislative common framework arrangements might be needed. At the time of writing, no agreement on a common UK framework for regulation in this area currently exists.
The Scottish Government’s Roundtable on Environment and Climate Change reported in June its view that:
Within the UK, regulation of chemicals is an area where the adoption of a UK-wide approach, within devolved responsibilities would be desirable, as all industry across the UK will need to continue to comply with EU rules in order to sell their products on the EU marketplace. Scotland has always relied on UK wide expertise in the area of chemicals management.
Scale of the task
Establishing a domestic regulatory framework for chemicals is a substantial task. REACH is an example of directly applicable EU legislation that is not straightforward to copy across into UK law. This is because the regulation relies on the European Chemicals Agency (ECHA) and is closely tied to the single market.
In its September audit report, the National Audit Office concluded that:
[Defra] needs to make sure that the centre of government is fully aware of the key elements that Defra is unlikely to deliver for a no-deal scenario and of impacts on key industry sectors, such as the chemical industry, which could be seriously damaged if a negotiated settlement is not reached.
Iain Thom, SPICe Research