Since the UK voted to leave the EU, there has been a depressing lack of clarity from the UK Government about the future relationship it seeks with the EU27. Rhetoric about comprehensive free trade areas and ambitious future partnerships do nothing for businesses that need to know how they will trade across the Channel on 30th March 2019.
This uncertainty and the policy confusion behind it is hitting confidence and investment in the UK’s Paper-based Industries. Projects are on hold or have been postponed. Unless there is rapid clarity on the end-game for Brexit, these investment pauses will become cancellations – and cuts in employment and growth for the UK.
CPI’s policy is clear. Our members have invested in cross European supply chains and they wish those to continue competitively after Brexit. They need to find skilled workers from across the EU without lengthy visa requirements. They want the common standards regime for products and machinery to continue, and they want to have robust trade remedies in place so that the UK can credibly assume the responsibilities for trade policy currently undertaken by the EU.
None of this is rocket science, and the ball is in the Government’s court. Without a clear vision for the UK’s future relationship, business will have no choice but to prepare for a hard Brexit – so, Prime Minister May, over to you…
Challenges for Corrugated
Brexit will have specific implications for corrugated packaging.
Many integrated businesses have long-term investments across the EU and their internal supply chains are based around being able to move paper and board freely across the Channel. If Brexit introduces friction into those supply chains, then decades of investment will be rendered less competitive and the UK will likely be left a more isolated “island market”, with potential impacts on customer choice and service. They may also be faced with concerns about the “rules of origin” for their products.
For those purchasing paper for conversion in the open market, the same challenges apply, plus the possibility of chasing new suppliers at short notice.
The biggest Brexit challenge for the UK corrugated sector will not be specific to the sector but will rather be related to the performance of its main customer industries like UK food and drink, and their ability to continue to export to the EU27 and more widely. A recent research report by the UK Trade Policy Observatory (1) shows that UK food and drink exports may decline in value by between 6.9% and 38.4% depending on the eventual Brexit outcome. Trade declines of this magnitude would cause very significant cascade effects to the rest of the UK economy, and corrugated packaging would undoubtedly be affected.
Implications for recovery and recycling
Brexit is also causing considerable concern within the recovery and recycling sectors.
The EU Circular Economy Package is a comprehensive policy framework that tackles several issues intimately linked to sustainability. Even as it enters into EU law, there is no certainty as to whether the new policies such as revised recycling targets and measurement protocols will apply in the UK or not. This makes planning for business, government departments and enforcement agencies all but impossible, since none of them know which law will apply to their operations.
The same is true for other relevant legislation such as the Trans-Frontier Shipment of Waste Regulations. Again, how can businesses plan, or hope to be compliant with such Regulations, if they do not know whether they will apply after March 2019, nor how they will demonstrate compliance?
One further impact of Brexit is that the UK will have to negotiate alone within global institutions on issues that affect UK businesses. The early signs are that the UK will have less influence and will be more likely to accept rules being imposed upon it. The recent shift in Chinese policy towards imports of certain recovered materials for recycling is a case in point. The UK did not press for Chinese compliance with the consultation conventions of the WTO and has not entered into a direct dialogue with the Chinese authorities, unlike the US Administration, which has been vocal in support of US businesses.
Brexit is an unprecedented constitutional upheaval for the UK. It’s also a potential earthquake for business and established cross channel trading links. It doesn’t have to be a disaster, but without clear action from the UK Government, it soon could be.
CPI Director General
Tel: 01793 889601