Ministers have warned that the chemicals sector faces £2bn of red tape after Brexit, double the cost of the industry’s initial estimates, as the UK sets up its own regulatory regime.
While Liz Truss and Rishi Sunak pledged to “clean up EU bureaucracy” during the Tory leadership campaign, the cost of Britain’s home-grown red tape post-Brexit is mounting.
A government impact assessment, seen by the Financial Times, has put the central estimate of the costs of registering chemicals in a new UK database, often doubling existing EU registries, at £2 billion pounds sterling
The chemical industry last year warned that the new regime, known as UK Reach, would cost around £1bn, but the government now accepts that many more substances will need to be registered than previously thought.
The British scheme would be much more expensive than the EU’s Reach system; UK companies spent £500m complying with the Brussels regime over the previous decade, gaining access to 27 markets.
A Defra spokesman said it was “working closely with industry and NGOs to find a lower-cost solution for the UK’s Reach register, which still ensures high levels of protection for human health and the environment”.
Defra’s impact assessment implied a bill of £91,000 for each substance registered under UK Reach and that 22,400 “different substances” would fall within the scope of the new regime.
Ministers plan to extend the deadline for signing up to UK Reach to spread the cost. The government has delayed the requirement for full datasets by at least two years to October 2025.
The UK’s new Reach regime has pitted ministers against a wide range of the manufacturing industry, from chemical companies to their customers in sectors such as automotive, aerospace, food and drink, steel and perfumes.
The Chemical Industries Association said it wanted to see strong regulation “but mass and unnecessary re-registration does not equate to higher health and safety standards”.
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While Sunak, the former chancellor, and Truss, the foreign secretary, have pledged to review all retained EU law and remove unduly burdensome rules, replacing it with British regulation is likely to prove costly and damaging .
Many of the “Brexit benefits” have yet to materialize six years after the Leave vote, while new border controls have hampered trade and been blamed for contributing to travel chaos at the port of Dover.
In the medium term, the UK will be 4% poorer than if it had stayed in the EU, according to the independent Office for Budget Responsibility, wiping £80 billion from Britain’s GDP and around £40 billion from income from the Treasury
Following the 2016 Brexit referendum, the UK chemical industry initially pushed for the UK to retain associated membership of the EU’s Reach programme, warning that it would cost UK companies up to £1bn to create a British version.
Under EU scope, chemicals must be registered with the European Chemicals Agency (ECHA) in Helsinki, each accompanied by a large amount of evidence and data.
During the 2020 Brexit trade negotiations, the UK was unable to negotiate reciprocal access to the database, leaving companies facing huge bills to create duplicate datasets to support their records Reach Reach.
Among the challenges for UK Reach is the lack of capacity and experience in the Health and Safety Executive. A report by the National Audit Office said records could be pushed back until 2027, with the HSE exploring plans to extend the deadlines.
The rising cost of UK Reach comes after the Treasury admitted last week that the UK’s Brexit divorce bill could rise to £42.5bn, up to £7.5bn more than initially estimated.
Treasury Secretary Simon Clarke said revised assumptions about inflation and the recent valuation of the UK’s liabilities with the EU pension scheme were the “main drivers” of the revised estimates.