Sean Milmo, European Correspondent08.10.16
The UK coatings industry is pessimistic about its future after the country voted by a 52/42 percent margin in favor of leaving the European Union.
A survey of its members by the British Coatings Federation (BCF) soon after the vote found that over 70 percent of them believe that EU withdrawal, dubbed Brexit, will have negative effects on their businesses.
With around 60 percent of UK coatings exports going to other EU country, foreign sales were forecast to decline by 25-35 percent.
Nearly a fifth of members were going to reduce staff, while 20 percent could potentially move their businesses out of the country.
However, the BCF reckons that the outlook is not all gloomy. “Given the importance of Europe to our members, I definitely have concerns about the economic impact of Brexit,” said Tom Bowtell, the association’s chief executive. “However there may also be opportunities.”
Brexit would give the UK the chance of reaching its own free trade agreement, which could open up new coatings markets outside Europe. Once the country has left the EU, it would be able to draw up regulations aimed at easing the cost burden on business.
Just how much changes in the post-Brexit era impact the coatings sector will depend on the outcome of the negotiations on a withdrawal agreement between the UK and the EU. These are likely to begin early next year, after the UK has formally told the EU Council, representing EU governments, that it is invoking Article 50 of the 2007 Lisbon Treaty which allows member states to pull out of the Union.
The Brexit negotiations will then have to be completed within two years unless the 27 member states agree unanimously to extend the deadline.
Officially the UK is no longer an EU member only when a withdrawal agreement has been approved by the EU Council and the European Parliament
The UK government has not yet decided exactly what it wants out of the Brexit negotiations. But it is likely to be a deal enabling the country to have access to the EU’s single market without tariff and non-tariff barriers. Norway, Iceland and Liechtenstein, and to a lesser extent Switzerland – all non-EU countries – are already part of the single market.
Much of the European coatings industry would like the UK to stay within the single market. The UK is one of the largest national coatings markets in the EU, after Germany, with annual total sales of £2.2 billion ( $3 billion), according to BCF figures. The EU provides 86 percent of its total coatings imports.
The benefits of the EU single market are that as one of the world’s most advanced free trade areas it is without tariffs and non-tariff barriers as a result of the harmonisation of national health, safety and environmental regulations and standards.
However, under the conditions of single market membership, non-EU states in the single market have to accept a basic EU principle of free movement of people across borders and comply with EU regulations over whose content they will have no influence. They will also have to contribute to the EU budget. These could all contradict key issues which persuaded voters to back Brexit, in particular control of immigration and national sovereignty.
The main alternative to a single market is a UK-EU free trade agreement. Since negotiations on it would be conducted separately from those on a Brexit deal, it could take years to finalise. Also it would include tariff and non-tariff barriers, so that it would curb levels of trade between the UK with a population of around 60 million and the 27 member states of the EU with a total of around 440 million.
“At the moment there is a massive amount of uncertainty which is why people in industry are so worried about what Brexit will bring,” said Peter Newport, director of Chemical Business Association (CBA), Crewe, England, whose members include distributors of coatings and raw materials to UK and EU customers. “ No one knows what will happen, except that whatever it is will be different,” he adds. “We’ll just have to make the best of it.”
Some of the more immediate uncertainties are about the implementation of existing EU legislation both in the short and long term.
Companies will have to comply with the last registration requirements of REACH – the EU’s nine-year-old regulation on the control of chemicals – which directly affects producers of certain coatings formulations and raw material suppliers.
The last phase of registrations under REACH is due to be completed in mid-2018, when the UK seems certain still to be an EU member. By then safety dossiers on unregistered chemicals and their uses will have to be submitted to the European Chemicals Agency (ECHA), the EU body responsible for administering the legislation.
“As with other EU legislation we remain bound by REACH until a withdrawal agreement comes into place,” said Nishma Patel, chemicals management director at the UK Chemical Industries Association (CIA), London.
The legal position of REACH could change radically once Brexit comes into effect. Some UK-based lawyers are claiming that UK producers and distributors of chemicals exporting into the EU may have to re-register their products under REACH because they would be classified as ‘new’ importers into the European Union.
“If the UK negotiates something similar to the (single market ) option, existing registrations will continue to be valid,” said Patel. “For any other agreement it is not yet clear what the outcome (for registrations) would be.”
After Brexit, the UK could draw up its own version of REACH. But this seems improbable because it could create big obstructions to the free flow of goods between the UK and the EU.
“It seems highly likely that any subsequent UK (REACH) framework would be based on the EU model,” said Christopher Hayman, CBA chairman. “Given the trend towards global harmonization, this approach seems both logical and practical.”
With other EU legislation affecting coatings, the BCF has already suggested the UK introduce changes to rules on emissions of volatile organic compounds (VOCs) in sectors like auto refinishing.
A major concern among UK coatings producers and importers is the effect of Brexit on cross-border supply chains. Many of the over 60 percent of coatings producers exporting into Europe have become well established in the region’s supply chains. Now these companies, especially SMEs which make up a large proportion of them, fear they will lose their position in these chains once the UK is outside the EU.
Such is the depth of the ramifications of Brexit that the UK coatings sector will need plenty to time to adapt to it. But first they need to be certain what the consequences of leaving the EU are.
A survey of its members by the British Coatings Federation (BCF) soon after the vote found that over 70 percent of them believe that EU withdrawal, dubbed Brexit, will have negative effects on their businesses.
With around 60 percent of UK coatings exports going to other EU country, foreign sales were forecast to decline by 25-35 percent.
Nearly a fifth of members were going to reduce staff, while 20 percent could potentially move their businesses out of the country.
However, the BCF reckons that the outlook is not all gloomy. “Given the importance of Europe to our members, I definitely have concerns about the economic impact of Brexit,” said Tom Bowtell, the association’s chief executive. “However there may also be opportunities.”
Brexit would give the UK the chance of reaching its own free trade agreement, which could open up new coatings markets outside Europe. Once the country has left the EU, it would be able to draw up regulations aimed at easing the cost burden on business.
Just how much changes in the post-Brexit era impact the coatings sector will depend on the outcome of the negotiations on a withdrawal agreement between the UK and the EU. These are likely to begin early next year, after the UK has formally told the EU Council, representing EU governments, that it is invoking Article 50 of the 2007 Lisbon Treaty which allows member states to pull out of the Union.
The Brexit negotiations will then have to be completed within two years unless the 27 member states agree unanimously to extend the deadline.
Officially the UK is no longer an EU member only when a withdrawal agreement has been approved by the EU Council and the European Parliament
The UK government has not yet decided exactly what it wants out of the Brexit negotiations. But it is likely to be a deal enabling the country to have access to the EU’s single market without tariff and non-tariff barriers. Norway, Iceland and Liechtenstein, and to a lesser extent Switzerland – all non-EU countries – are already part of the single market.
Much of the European coatings industry would like the UK to stay within the single market. The UK is one of the largest national coatings markets in the EU, after Germany, with annual total sales of £2.2 billion ( $3 billion), according to BCF figures. The EU provides 86 percent of its total coatings imports.
The benefits of the EU single market are that as one of the world’s most advanced free trade areas it is without tariffs and non-tariff barriers as a result of the harmonisation of national health, safety and environmental regulations and standards.
However, under the conditions of single market membership, non-EU states in the single market have to accept a basic EU principle of free movement of people across borders and comply with EU regulations over whose content they will have no influence. They will also have to contribute to the EU budget. These could all contradict key issues which persuaded voters to back Brexit, in particular control of immigration and national sovereignty.
The main alternative to a single market is a UK-EU free trade agreement. Since negotiations on it would be conducted separately from those on a Brexit deal, it could take years to finalise. Also it would include tariff and non-tariff barriers, so that it would curb levels of trade between the UK with a population of around 60 million and the 27 member states of the EU with a total of around 440 million.
“At the moment there is a massive amount of uncertainty which is why people in industry are so worried about what Brexit will bring,” said Peter Newport, director of Chemical Business Association (CBA), Crewe, England, whose members include distributors of coatings and raw materials to UK and EU customers. “ No one knows what will happen, except that whatever it is will be different,” he adds. “We’ll just have to make the best of it.”
Some of the more immediate uncertainties are about the implementation of existing EU legislation both in the short and long term.
Companies will have to comply with the last registration requirements of REACH – the EU’s nine-year-old regulation on the control of chemicals – which directly affects producers of certain coatings formulations and raw material suppliers.
The last phase of registrations under REACH is due to be completed in mid-2018, when the UK seems certain still to be an EU member. By then safety dossiers on unregistered chemicals and their uses will have to be submitted to the European Chemicals Agency (ECHA), the EU body responsible for administering the legislation.
“As with other EU legislation we remain bound by REACH until a withdrawal agreement comes into place,” said Nishma Patel, chemicals management director at the UK Chemical Industries Association (CIA), London.
The legal position of REACH could change radically once Brexit comes into effect. Some UK-based lawyers are claiming that UK producers and distributors of chemicals exporting into the EU may have to re-register their products under REACH because they would be classified as ‘new’ importers into the European Union.
“If the UK negotiates something similar to the (single market ) option, existing registrations will continue to be valid,” said Patel. “For any other agreement it is not yet clear what the outcome (for registrations) would be.”
After Brexit, the UK could draw up its own version of REACH. But this seems improbable because it could create big obstructions to the free flow of goods between the UK and the EU.
“It seems highly likely that any subsequent UK (REACH) framework would be based on the EU model,” said Christopher Hayman, CBA chairman. “Given the trend towards global harmonization, this approach seems both logical and practical.”
With other EU legislation affecting coatings, the BCF has already suggested the UK introduce changes to rules on emissions of volatile organic compounds (VOCs) in sectors like auto refinishing.
A major concern among UK coatings producers and importers is the effect of Brexit on cross-border supply chains. Many of the over 60 percent of coatings producers exporting into Europe have become well established in the region’s supply chains. Now these companies, especially SMEs which make up a large proportion of them, fear they will lose their position in these chains once the UK is outside the EU.
Such is the depth of the ramifications of Brexit that the UK coatings sector will need plenty to time to adapt to it. But first they need to be certain what the consequences of leaving the EU are.
