Brexit and plastics

Materials World magazine
1 Dec 2017

The British Plastics Federation warns of costly trade tariffs if the UK fails to secure a Brexit deal with the EU, while concerns regarding workforce are also prevalent. Gary Peters reports.

As ever, Brexit is in the headlines. Now it’s the turn of the plastics industry. The British Plastics Federation (BPF) – whose members account for around 80% of UK plastics industry turnover – has outlined that if the no deal scenario is forthcoming, the cost of trade with the UK could jump by £880m.

The basis for the claim relates to the possibility that the UK could switch to World Trade Organisation (WTO) tariffs if it is unable to secure a trade deal with the European Union (EU).

The BPF, in a report titled, Understanding Plastics Trade, has calculated that the cost of exports could increase by £340m, with imports rising by £540m, under WTO tariffs. These sums are based on current statistics. 

At present, the UK imports around £13bn of plastics material, products and machinery, with exports coming in at £8.4bln. For the EU portion, this breaks down into £5.6bln of exports and £9.1bln of imports, representing a deficit of £3.6bln.

‘The UK is a successful exporter of plastic materials, products and machinery but also remains highly reliant upon imports, making it absolutely essential that a favourable trade deal is struck with the EU,’ explained Mike Boswell, chairman of the BPF’s Brexit taskforce, upon the release of the report. 

Speaking to Materials World, Boswell adds the sector is ‘worried about the impact of a hard Brexit’, and claims that non-tariff barriers could also have an impact. ‘Non-tariff barriers are issues such as port friction. If you look at the situation today with raw materials from the EU, they are coming from through seaports such as Dover, and that happens seamlessly. Goods and people move through with no difficultly. The risk comes if we have a customs barrier, and the complexity makes it difficult.’

The Brexit taskforce

The BPF’s Brexit taskforce was created following the referendum in June 2016. It has released various reports on trade, skills and the current workforce. 

One, called Securing the Future, highlights how the EU is the UK’s ‘single most important trading partner for plastics materials and products’. It also adds that around 80% of the machinery used is sourced from EU countries. 

Speaking in October, BPF Director General Philip Law, said, ‘There are some materials and types of machinery that are not produced here in the UK. They have to be imported. Equipment imported from the EU and elsewhere is often at the forefront of automation and all the elements that make up industry 4.0. Without access to these on a level playing field, we risk falling behind the competition.’

This aspect is a recurring theme, with access to skilled labour a concern highlighted by the BPF. According to the federation, more than 18,000 EU citizens are employed in the sector, with one in five shop-floor workers from the EU. BPF studies claim that two thirds of companies are struggling to recruit staff, up from half before the referendum – around 50% of companies also rely on temporary workers during peak times. In Securing the Future, the BPF warns the industry ‘needs immediate assurance that existing EU workers in the plastics industry can stay and that companies will be able to access skilled workers in the future’.

However, industry surveys, from June-July 2017, do show a degree of optimism among companies. In its business conditions report, undertaken every six months,
the BPF found that 80% of 106 respondents expect sales turnover to increase over the next 12 months – 5% think there will be a reduction. Exports sales will also go
up, according to 62%, but the weakness of the pound is having a negative effect on the cost of raw materials. On the issue of workers, 35% are planning to hire more, but this is tempered by the fact that over half, 57%, are experiencing difficulties in doing so.

The real issue, says Boswell, ‘is that there is so little that is really known’. He adds, ‘It’s not just a question of the salary [in terms of recruiting], but also about the security of working in the UK, and I think that’s a real concern.

‘We’ve had a lot of discussion at political level, and I guess this is often the way negotiations go. However, from an industry perspective, there is a desire to get some sort of clarity on what might happen.’