No deal Brexit could put industry at risk, says NEPIC chief

NEPIC Chairman Mark Kenrick outlines why No Deal would be the worst possible outcome from Tuesday’s Commons Brexit vote for Teesside’s chemical manufacturing sector…

The future of the region’s chemical-processing industry – much of it based right here on Teesside – is at risk when the MPs vote on the withdrawal deal negotiated between the UK and EU on Tuesday.

It’s crucial that our local politicians understand that a No Deal exit from Europe could have a very significant impact on an industry that directly employs 7,500 people locally and many, many more through the local supply chain.

I am Chairman of the North East Process Industry Cluster (NEPIC) which represents the chemical-processing sector across the region and on their behalf we have written to our local MPs to emphasise the importance of Tuesday’s vote for an industry that remains such a key employer to the Tees region.

NEPIC supports the objectives for the Brexit process declared by both the Chemical Industries Association (CIA) and the European Chemical Industry Council (CEFIC) following the referendum that any final agreement must support frictionless trade, consistent regulation and access to a skilled workforce.

It is our view that whilst the Brexit agreement proposed by Prime Minister Theresa May and her team is not perfect, it does enable detailed transition negotiations to continue post-March 2019 which would hopefully support the objectives that are so important to our sector.

A No Deal Brexit, however, would represent a significant threat to our local process industries. Quite simply, unlike the stockpiling of products that some sectors are planning, it is not possible to store thousands of additional tonnes of chemicals as a contingency.

Therefore, any disruption or delays at our ports – anticipated results of a No Deal Brexit – could force some of our plants to shut down for a period.

Should tariffs come into force, the situation could worsen, as product costs would increase, meaning these plants become less competitive, potentially resulting in more significant, long-term closures.

Many chemicals flow between Teesside’s processing plants, with the products from one plant becoming raw materials for others. This integrated strength can be a weakness should one of those plants close, as past experiences proved.

A real worry within the industry is that the integrated nature of Teesside’s chemical manufacturing sector means with the closure of one plant a potential domino effect could kick in resulting in a similarly negative impact on another.

At the same time, many of the integrated process plants on Teesside are owned by large overseas conglomerates with the capability, if necessary, to switch production to other facilities in Europe or across the world. If this production moves away from Teesside and the UK, it would be extremely difficult to bring it back.

I must emphasise that our purpose in stating our position is non-political. We work with representatives of all political parties on a regular basis to set out our issues and listen to different political views. As a sector, we take our political neutrality seriously.

However, as the representative body of significant businesses in in the North East of England, we believe it is crucial to set out the facts, reasons and our very real concerns. NEPIC works to ensure that chemical-processing companies operate in an environment that enables growth and long-term sustainability. A No Deal Brexit would bring significant threat to that environment.

Stretching back more than 170 years, Teesside has been the centre of a continuous stream of world-leading products and processes. This legacy, and the continual business rejuvenation driven by innovation and investment, has cemented the region as a leading location for the process industry.

Teesside is home to the UK’s largest – and Europe’s second largest – single cluster of process, chemicals and energy companies. According figures produced by Tees Valley Combined Authority, 65% of its companies export products valued at around £56bn in 2016. The sector accounts for 7% of Tees Valley GVA (£111,000 per employee), whilst employing only 3% of the total workforce, with a productivity 12% higher than the Northern Powerhouse average.

Teesside is hot-wired into the North Sea for the supply of oil and gas-based raw materials, with Teesport making the region a central point in the North Sea basin, giving access to both the European and wider global markets. In simple terms, this represents a virtual pipeline of both raw material and products that flows between the region and the nearby European ports.

It’s crucial that we do not put our position of strength at risk via a No Deal Brexit. And it’s equally vital that the region’s MPs go into Tuesday’s Commons Brexit vote knowing what’s at stake.

 

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