Life after Brexit

UK Government continues to state its intended aim to agree a withdrawal agreement and a trading agreement with the European Union, so avoiding a ‘no deal’ exit. The official policy position is to continue to seek regulatory alignment on goods but not services with the EU, meaning that the country would still continue to enjoy access to the customs union and single market for products.

Over the past decades supply chains across Europe have become more integrated as industry has treated the EU single market as a true customs union free of tariffs and internally without borders. Certainly some manufacturing in the UK has moved to the continent as companies take advantage of economies of scale and frictionless trade, creating economies of scale in what is a mature and low growth European economy.

In the lubricant sector many companies still manufacture in the UK even though some of the components such as base oils or additive treatments are imported from abroad, typically places like Rotterdam or even further afield in North America.

UK industry today is shifting away from traditional lubricants to advanced formulated products for industrial applications such as metalworking. These lubricants provide the benefits of better performance and longer life, but few of them are manufactured from components that are still made in the UK.

Over the spring the government released details of its temporary tariffs under World Trade Organisation’ Most Favoured Nation terms where average tariffs were zero with the exception of some agriculture, automotive vehicles and bio-based refinery products.

Like many areas of UK manufacturing, existing chemical regulation impacts not only on chemical production and distribution in the UK, but also on manufacturing where chemicals are used, whether this is in articles or other types of products.

Last year the UK Government published a 25 year environmental strategy, charting the course for the UK to become a global champion and world leader in environmental management. If the UK sets its own standards for chemicals, the recyclability of packaging or the management of waste, then other countries might refuse to recognise UK only standards.

Multiple regulatory standards?

This could leave UK businesses meeting multiple regulatory standards depending whether products are sold in the domestic market or exported abroad. The added complication is that environmental matters are devolved to the four nations of England, Scotland, Wales and Northern Ireland which could become a regulatory nightmare if all countries chose to implement their own version of UK REACH, the chemical management regulation.

The date of Brexit now appears to be moving further back into the calendar year as Government shows its intent not to leave on a ‘no deal’ basis with the EU. Proposals to avoid a visa scheme for UK nationals travelling in Europe for limited periods and a proposed EU settlement scheme allowing existing EU citizens who were resident in the UK at Brexit date, the right to remain on satisfying three simple tests are all evidence of a pragmatic approach to leaving the EU.

For new workers, Government proposals are to remove the local market test and quotas allowing firms to recruit EU skilled citizens into roles requiring at least ‘A’ levels and paying a minimum of £30,000 p.a. This would not apply for temporary EU staff. However the East Midlands Chamber of Commerce expressed concerns about the minimum level of pay which might exclude some more administrative or support workers from coming to the UK.

Before Brexit day which now looks increasingly likely as the 30 June in the unlikely event of a ‘no deal’ or earlier in the event of an agreement around withdrawal and future trading terms. UK Government is still encouraging companies to plan for a no deal by, for example, reviewing their level of stockholding with their suppliers, customers and distributors as well as reviewing existing chemical registrations under EU REACH.

Meanwhile the UK Government has stated its aim of securing a deal with the EU. What form this takes and even whether it has the support of the majority of MPs, even at this late stage, remains unclear.