UK Chemical Industry: Regulatory Divergence

Dave Doogan Excerpts

Wednesday 26th February 2020 Westminster Hall

[Dave Doogan (Angus) (SNP)]

I am very happy to sum up for the Scottish National party in this important debate, whose importance belies its attendance. In the first instance, I echo the sentiments of the hon. Member for Sefton Central (Bill Esterson), who secured the debate, by pointing out that little or no manufacturing takes place without almost total dependence on the chemical manufacturing sector and the regulation that underpins that—both domestically in the United Kingdom and, just as importantly, around the world.

Across all manufacturing sectors, we see the clearest indications from stakeholders, whether commercial, trade union or in processing, that we live in a world of very integrated international supply chains, and we have done for some time. They are dependent on regulatory alignment. It is also worth pointing out the amount of research and development money that goes into the chemical industry, much of it private—how that interacts with our higher education sector, the role the United Kingdom plays in that and how we discharge that role with our international partners, many of whom are in the European Union.

[Alex Cunningham]

The hon. Member mentions research and development, and we are of course dealing with multinational companies with plants all over the world. If they are going to do research and development, surely they will do that in areas where they have common regulations such as REACH, rather than in a future British chemical industry, which could be a backwater.

[Dave Doogan]

The hon. Member is right, and the risk that the United Kingdom runs in seeking to pursue some alternate regulatory framework is exactly as he sets out: industry will produce its products to be compliant with the regulation consistent with the size of the market opportunity—it is not a blanket approach. If a market is subject to a particular regulatory framework, but that market is not big enough for the industry to comply with the framework, they simply will not comply and those products will not be available in a post-Brexit, post-REACH-regulation United Kingdom.

As we roll the dice on this issue, it is important to understand the slightly rarefied position occupied by the chemical industry in the United Kingdom. It has a turnover of £56.6 billion, but a very enviable gross value added of £19.2 billion. The Government must tread carefully and pay close attention to the members within trade organisations, such as the Chemical Industries Association and others, who are very clear with their call for regulatory alignment.

We have heard an awful lot about the cost of the re-creation of some successor to EU REACH, which is as yet unspecified, but I genuinely, thoroughly believe that the point is moot. As Members have said, the industry will offshore the UK manufacturing of chemicals. Other industries within the UK that rely on the products of the chemical industry will be subject to buying from another market. That will in all likelihood be the European Union, so we will then face the farcical situation of having dispensed with REACH regulations here—which will have cost us our industry, or a large part of it—and of then being in possession of the very same standard of product purchased from the EU, just without the £56.6 billion of turnover, or a large part thereof, and the jobs that went with it. The stakes are no lower than that! Having said that, were the UK to press ahead with some parallel regulatory framework for chemicals, the resultant animal testing, as others have mentioned, would be held in contempt by society, and rightly so. It is important to bear that in mind.

The regulation and supply of chemicals is yet another area of huge complexity in that Brexit ambition. Brexit will have an impact on the chemical industry driven by changing regulatory requirements, as others have mentioned, and by other trade barriers, potentially including tariffs and quotas. The REACH chemicals regulations are but one example of directly applicable EU legislation that is not straightforward to copy across into UK law. The principal objective remains, however, to ensure that those regulations still have priority in a post-Brexit United Kingdom dynamic. That is because the regulations rely on the European Chemicals Agency and are closely tied to the needs of the single market. The UK and EU chemical industries both want trade deals to ensure frictionless trade and regulatory consistency between the UK and the EU. That points to the complex supply chains that exist for the manufacturing sector.

I am very glad that the hon. Member for Sefton Central, who secured the debate, mentioned potassium chromate. As a former aircraft engineer, I still remember keenly the sweet smell of that sticky green substance which was difficult to get out from under the fingernails. Its role in preventing dissimilar metal corrosion in aircraft is well known and vital. That had the effect of taking me slightly down memory lane.

In conclusion, as a Scottish and a Scottish National party MP, I have no hesitation in supporting the ambitions of the hon. Member. The UK is a key global player in the chemical industries just now. As far as I can tell, the only chemical company in the UK in the top five chemical companies in the world is INEOS, which has a major presence in Grangemouth in Scotland. The Chemical Industries Association also covers the pharmaceutical industry, and I am very privileged to have in my constituency of Angus an extraordinarily large and important GlaxoSmithKline plant. Nowhere does interdependence and mutual reliance on common regulation apply more than in that plant.

[Alex Cunningham]

INEOS has been in my constituency as well, but it is actually closing down a plant there; the plant has finished because it is past its use-by date. INEOS can invest billions of pounds in the middle east, but nothing in Britain at this time. For me, the main issue is what the hon. Gentleman has talked about: the integrated nature of the chemical industry. The industry is losing a key component; if there are changes in regulations over time, more and more of those parts will disappear. We will therefore be reliant on the imports that the hon. Gentleman mentioned.

[Dave Doogan]

Indeed. I am not here to defend or uphold the commercial decisions of INEOS, but what the industry more generally needs at this minute is clarity and certainty from Government, as far as that is possible. I look forward to the Minister explaining how the Government will give the industry the confidence and certainty that will enable them to invest in plants in Scotland and the rest of the UK. Those plants’ return on investment may take decades, and it is extremely important that we give them every opportunity to invest in infrastructure and jobs, with the attendant benefits that those bring to our communities.

Over and above the material contemporary considerations of the chemical industry, this issue is important for the livelihoods of many people in Scotland and in my constituency of Angus. Of course, industrial production of chemicals first began in Scotland, with the industrial production of bleach just north of Glasgow. We have moved a long way in the intervening 150 years, and I would hate for us to start moving back as a consequence of Brexit.

--- Later in debate ---

[Victoria Prentis]

As a lawyer, I tell the hon. Gentleman that that is an extremely long and complicated question, to which I will endeavour to provide some of the answers, but not all, because, as he knows, it is a live negotiating situation. I recognise that that brings uncertainty for business—I really do—which is uncomfortable for many of us, but it is important that the country voted to leave the EU and through various—[Interruption.] The hon. Gentleman has been here for the last few years, as I have.

Through various emanations, we have reached a position where we are definitely leaving the single market and the customs union, and we will no longer participate in the ECHA or the EU regulatory framework for chemicals. I will set out what the Government’s position is in the immediate future. I ask the hon. Gentleman to accept that we do not have all the answers, but I emphasise that my door, and the door of the Minister with responsibility for the issue, will be open as we go through the negotiations this year.

[Dave Doogan]

It is helpful and candid of the Minister to clarify that the Government do not have all the answers. In pursuit of those answers, may I ask whether the Minister and her officials will give due cognisance to the fact that the scale of the European chemical industry, and the regulation that underpins it, is the global benchmark? A UK post-Brexit chemical industry would divest from that at its peril.

[Victoria Prentis]

In many ways, the hon. Gentleman will find that we are on exactly the same page, so I ask him to listen to the rest of what I have to say. We can then discuss the position as it emerges in the negotiations this year.

As I said, we are leaving the single market and the customs union, so we need to prepare for life outside at the end of this year. Many in the sector have already started to prepare and we will help them as much as we can. First, we must create our own independent regulatory regime, which is called UK REACH, as we have heard. Hon. Members will note that that is not a million miles away from the name of EU REACH. That will ensure continuity and minimise disruption for businesses and consumers, and will give us the freedom to do things differently where we consider that in our best interest. UK REACH will be our own framework but will retain the fundamental approach of REACH, including its aims of ensuring a high level of protection for human health and the environment, and of enhancing innovation and competitiveness. We have developed transitional measures, such as grandfathering and downstream user import notifications, that address the industry’s concerns about maintaining continuity of supply between the UK and Europe.

The building blocks of REACH will all remain. Through the Environment Bill, we will make provision to allow us to amend REACH in future to ensure that our chemicals management remains fully up to date. All change will remain consistent with the fundamental aims and principles enshrined in EU REACH. There will also be a series of protected provisions that cannot be changed, such as the last resort principle on animal testing, which will be included in the Environment Bill, as has been said. The UK will, of course, continue to be at the forefront of opposing animal tests where alternative approaches can be used. We have led the way on that in the EU system to date.

I recognise the concerns that several hon. Members have raised during the debate about the UK diverging from the approach taken in the EU to the regulation of chemicals, which are obviously shared by all our stakeholders. We will not diverge for the sake of it. If we diverge, it will be done in the best interests of the UK and the environment, and of course we will take account of the impact on industry. What matters is that the decisions we take will be our own, reflecting our new autonomy. Robust scientific evidence lies at the heart of the decisions we take, and that will continue, as provided for in the UK REACH legislation. As I said, we are continuing to develop the proposals, to make sure that we take decisions transparently and with stakeholder engagement. I am keen that we go forward in that vein.