Brexit Shakes Up Global Chemical Industry

CC BY 2.0. Banksy mural photographed by Duncan Hull

An aspect of Brexit that rarely makes the news scares the chemicals industry most.

In 2006, Europe introduced an ambitious regulation to ensure the safety of all chemicals. Known as REACH = Registration, Evaluation and Authorization of CHemicals, the regulation requires that every manufacturer or importer of chemicals in the European Union must file a dossier with the European Chemicals Agency (ECHA) which declares all known safety information and recommendations for safe use of chemicals.

Recognizing that no government agency can ever keep up with assessing the safety of all chemicals and banning or regulating the dangerous ones, the EU made the chemical industry itself responsible. The REACH dossiers must demonstrate that each chemical can be used safely. After 10 years of compiling and submitting these dossiers, the chemical industry finally completed the chemical data submittal in 2018.

Just in time for Brexit next year.

Global chemicals affected

Of course UK chemical companies will be affected. Any chemicals sold from the UK into the remaining EU countries become illegal on the day Brexit takes effect because the British companies' registrations with the European Chemicals Agency are no longer valid. Their chemicals become 'imports' to the EU-27 countries that the UK is leaving behind.

But the impact is much more widespread than that. Chemical manufacturers from all over the globe must comply with the EU REACH regulation if they want to sell their chemicals to the EU. A couple favorite methods for supplying chemicals legally to the EU include having the EU-based importer register the chemicals or appointing an "only representative" in the EU to represent the foreign company for the purposes of registration (this helps foreign companies protect their confidential information and manage costs).

Where do you suppose most of those international companies went when selecting the importer or only representative? Naturally, to the place where they could find colleagues who share a language - quite often preferring the UK over other EU countries for this communication benefit.

So now Brexit has launched a scramble as companies try to figure out how to organize to avoid disruptions of chemical markets. Timing is critical. For example, a UK manufacturer can only transfer their dossier to a representative in the remaining EU after Brexit takes effect, while a UK-based only representative can only transfer their work to an EU representative before Brexit.

This may sound like a game of bureaucratic musical chairs, but the fact is that when the music ends, some companies may be left standing without a legal opportunity to continue their sales of chemicals. So what, fewer chemicals is better you may be thinking. But what if the chemicals in short supply are the ones needed to sanitize hospital surgical units? Even where shortages do not affect critical activities, the ripple effects of supply chain delays could have large impacts on the economies that rely on modern just-in-time supply chains.

REACH is so huge and complex, that it took 10 years to get everyone into the system to start with. Now Brexit gives all the companies registered via the UK a single day on which their obligations must be re-organized to reflect the new geographic reality. Fingers crossed.