Richard North, 04/08/2020  

It was in her Mansion House speech on 2 March 2018 that Mrs May spoke on our future economic partnership with the European Union.

In that speech she told us that we will want to explore with the EU, the terms on which the UK could remain part of EU agencies, one of which was the European Chemicals Agency (ECHA), the body which implements REACH and other EU chemicals legislation.

For a prime minister to be that ill-informed was more than a little concerning, but ill-informed she was. As with most of the EU agencies (but not all), there is no provision for third countries to be part of ECHA.

As made absolutely clear in Regulation (EC) No 1907/2006, establishing the agency, the agency's mission was to service Member States, and only they can be full members. Once the UK left the EU, our membership lapsed.

There is a provision for Efta/EEA members to participate in the work of ECHA and, by virtue of EEA Joint Committee Decision No 25/2008, they can also participate in the Management Board, but they have no right to vote.

To achieve that status, the Efta/EEA states are required to adopt all the REACH legislation into their domestic law and thereby, when the Commission took authorisation decisions, the Efta States would "simultaneously and within 30 days of the Community Decision, take corresponding decisions", thus allowing the marketing of the chemicals authorised.

The only way a third country could get any kind of special treatment would be to implement REACH legislation into its own domestic law and then to build-in a recognition system into a free trade agreement. This is the path adopted by South Korea with its Korean REACH.

Even though the chemical industry seems to have deluded itself that there was an opportunity for continued collaboration, it should have known that the possibilities were extremely limited, and that Mrs May was talking nonsense.

Furthermore, whatever chances there might have been under the May administration to make provisions for the UK chemical industry within the EU, these evaporated once Johnson became prime minister.

Even now, though, the government is very vague on the post-transition and, so far, there does not seem to have been any formal notification of a new system.

Although existing REACH authorisations will continue to be recognised, UK companies will no longer be able to apply for authorisations, and existing authorisations will have to be transferred.

The complexities and uncertainties, however, have not stopped the Financial Times running a piece headed: "UK chemical industry warns of £1bn cost to duplicate EU regime".

This tells us that the safety registrations of the chemicals currently used in the UK - currently held in the REACH registration database run by the European Chemicals Agency in Helsinki - will need to be re-registered with a new UK equivalent.

There is a possibility though that the FT is jumping the gun. Defra, the responsible Ministry, has certainly admitted that it plans to have a replacement system ready, although it has produced no detailed (or any) information, other than to say that this will be ready by the end of the year.

Nevertheless, the FT is speculating that registering a single chemical in the new UK Reach database could cost up to £300,000 if companies are required to buy "letters of access" to use the vast banks of test data held by ECHA - information that is expensive to produce and often owned by third parties. Even then, additional testing may be required.

Steve Elliott, chief executive of the Chemical Industries Association, asserts that unless a data-sharing deal is done with Brussels the new system would add more than £1bn in costs to companies, just to duplicate existing registrations.

To make matters more complex, chemical business owners have still not seen the computer software that the Health and Safety Executive will use to collect the new UK registrations. There is concern that there could be considerable problems in getting hold of the registration data, which is held in commercial agreements.

This, of course, will not be a problem if the UK continues with its current position of recognising EU authorisations after the end of the transition period. Thus, the real problem at the moment, as one of the FT sources concedes is that the situation is unclear "and we're getting closer and closer to the time when Brexit is going to happen".

At the moment, I can't see how the UK government could even set up a scheme in the time available. And, from the moment a new scheme does start, it would take time for new registrations to be made, and authorisations to be processed. Thus, there must surely be a UK transition period, when the EU system continues to be recognised.

Presumably, it is possible that some provision might be made for the chemical industry in any "future relationship" agreement, which may explain why the government has been reticent to supply any details as to its intentions after the end of transition.

All we have to go on, for the moment, is a letter to MPs in May, from Rebecca Pow, the minister at the Department for Environment, Food and Rural Affairs overseeing the policy. She admits there will be "significant cost and burden to industry" in complying with UK Reach, but argues that the "benefits of having control of our own laws outweigh the costs".

That, says the FT, is not a view shared by Dani Loughran, managing director of Aston Chemicals in Aylesbury, a medium-sized business that imports and distributes chemicals used by some of the world's leading cosmetics brands.

Aston sells about a thousand different products, many of which the FT says will require a new UK registration. Thus, it asserts, the company and its suppliers may have to commission fresh testing to duplicate the Echa data.

Even without new testing, the company says, the basic cost of registering each chemical will be about £5,000, with the additional cost of "letters of access" varying from £33,000 for an emollient used in a face cream, for example, to £150,000 for a shea butter used as a base for sunscreen. In one case a letter of access cost nearly £300,000.

"Our EU competitors are licking their lips, and that is deeply frustrating", Ms Loughran says of the mounting costs. "We've spent 30 years growing from nothing, now all these barriers are being forced upon us". She adds: "It is enormously wasteful and uncompetitive for UK companies like us to have to spend time, money and resources to repeat all of these registrations for no additional benefit to anyone".

However, there are doubts that "UK Reach" would have the bureaucratic bandwidth to manage the new processes. ECHA employs 600 people with an annual budget of €110 million, compared with the £13 million a year budgeted for the UK version, including up to 50 staff.

Crucial to shrinking the new registration costs for UK companies — by up to 80 per cent according to Chemical Business Association chief Peter Newport — will be whether British negotiators can broker a data-sharing agreement between ECHA and the UK authorities to remove the need for the letters of access.

"Basically the EU has a pantry in Helsinki stuffed full of goodies, and we now want to populate the UK's new pantry with that data", Newport said, although he fears that the cost of UK registration risked making some chemicals commercially non-viable in the UK market, with knock-on effects for supply chains and UK jobs.

All this, though, does seem to be speculation. The point, therefore, is that an industry of this importance should not be in this position. Far from taking back control, the UK government seem to be losing control, and it is about time it got a grip.

Also published on Turbulent Times.

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