For British chemical firms, Brexit red tape just starting
For nearly a century, the firm of Teal & Mackrill in the port city of Hull in northeast England has made paints for special applications, like fishing trawlers and factory floors. It produces marine paint, for example, with ingredients to prevent barnacles from encrusting hulls.
Now in a little-noticed consequence of the new Brexit trade deal, the company is facing real concerns about its future.
Geoff Mackrill, the third member of his family to helm the company, said that growing British regulatory burdens on chemicals may mean that eventually he won’t be able to obtain some of the additives that make his paints distinctive.
“The worry is that some of those materials that we use,” he said, “may become unavailable because of those costs.”
It is a concern that is spread across Britain’s $45 billion a year chemical industry.
Prime Minister Boris Johnson, when he announced the trade deal Dec. 24, said Britain would now be free “to set our own standards, to innovate in the way that we want.”
Business people like Mackrill were relieved that Britain had avoided a chaotic exit and that goods made in Britain could continue to cross over to Europe free of tariffs.
But some companies, notably in the chemical industry, are finding that business has become more complex rather than easier. The European Union’ s elaborate and burden some regulations may no longer apply inside Britain, but they remain a fact of life for British firms like Mackrill’s that wish to continue selling their goods in Europe.
Adding to the burden, the British government is creating its own demanding set of chemical regulations, a mirror of the EU laws.
An industry groupsaid the cost to chemical businesses of recreating the European regulations, which requires extensive documentation, could reach as muchas$1.36 billion, potentially a major burden on small firms and those with thin earnings margins.
The regulatory changes, plus the fact that chemicals can have long supply chains, have led some businesses to rethink their activities in Britain.
Before Brexit, Aston Chemicals, a firm based in Aylesbury, about 50 miles northwest of London, imported chemicals from around the globe, performed the necessary paperwork, paid any import duty and then dispatched them by the truckload to European makers of moisturizers or dandruff shampoos.
Using Britain as a hub “worked incredibly well,” said Dani Loughran, the company’s managing director. But after Brexit, it doesn’t.
Trucks in Britain bound for Europe now face lengthy customs procedures at the border.
And while British-made goods can still enter the European Union duty free, that’s not the case for goods that originated elsewhere.
So, an importer like Aston Chemicals needs to pay tariffs on products made in the United States or Asia, and then again when it distributes them to the European Union, effectively doubling the rates, Loughran said.
Consequently, t he company will now instead supply Europe from a base in Poland, a member of the European Union. It has cut its British warehouse staff from three to one.
These new obstacles aren’t just a drag for the chemical industry.
“I think everyone who has been using the U.K. as a distribution center for Europe is going to be affected in the same way,” Loughran said. They “are going to find it very difficult from now on.”