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The hunt for Brexit’s regulatory dividend

We are coming towards the end of the first year since Brexit came into force and the hunt is on to clarify the regulatory dividend from the UK’s departure from the EU.

Lord David Frost announced in his Brexit opportunities paper in September that the government wanted to build on the work of the Taskforce on Innovation, Growth & Regulatory Reform (TIGRR) that was chaired by former Conservative party leader and arch-Brexiter Iain Duncan Smith.

Among the areas listed for investigation were reforms to the agri-environment sector, including “the regulation of innovative genetic techniques following our departure from the EU”, which includes gene editing (not to be confused with genetic modification, or GM, gene editing speeds up only what could have been achieved through traditional breeding or which could occur naturally).

The question now is how this big picture political commitment to re-regulating (if not de-regulating) plays out on the ground, in a multi-way conversation between scientific researchers, investors, industry, regulators and the government. 

The Britain after Brexit briefing took a sample of this conversation this week by attending an “innovation” lunch at the Palace of Westminster hosted by BASF, the German chemicals giant, and Owen Paterson, the former environment secretary and long-time critic of the EU.

It was an instructive few hours, partly because it demonstrated how immature that conversation is, as the UK gropes towards that promised better future.

Paterson opened with some crowd-pleasing bombast. “It’s not that our civil servants say ‘no’,” he roared. “It’s that they never — ever, ever, ever, ever — say ‘yes’.”

There was some sympathy for this view around the table. Industry gets frustrated at the lack of speed in Whitehall and, almost as importantly, the lack of predictability in regulation. Industry often just wants to know what hoops it needs to jump through, even if it doesn’t much like the hoops. “Just tell us what we need to do,” as one boss put it. 

And the record isn’t great. One artificial intelligence company that uses satellite photographs to help farmers and businesses to audit green measures and better target pesticide usage reckoned the post-Brexit UK government had missed a “golden opportunity” to steal a global march in that field.

An executive argued that if the government had taken a bolder, speedier approach to implementing its environmental land management schemes three or four years ago it would have made a big difference to their business, but the momentum dissipated in Whitehall bureaucracy.

Former regulators also agreed that more speed was required. Dave Bench, the chief executive of the Crop Protection Association who until June last year was a veteran of the Health and Safety Executive leading on chemical regulation post-Brexit, was among those banging the drum for more speed.

The UK needed to “fix the slowness” in its regulatory approvals, he said. That means the UK system should start to favour the “innovation principle” over the “precautionary principle”, which Bench said would require his former colleagues to shake off the “EU culture” that he said still deeply permeated the UK regulatory bureaucracy after three decades implementing edicts from Brussels.

But for all the tub-thumping — and there are plenty of these kinds of conversations going on at the moment — it is still sometimes difficult to discern what, exactly, is the government’s overall strategy, and what it is intended to deliver.

Paterson, an MP from Shropshire, which is a rural English county with strong farming traditions, cited the fact that BASF had moved its potato blight GM trials to the US and said it would be a “failure” of post-Brexit Britain if those trials didn’t return.

And yet Thomas Birk, the BASF managing director for UK and Ireland, is doubtful that the British public will embrace GM technologies any time soon, given the antipathy of UK public opinion towards the subject. Paterson may be waiting for some time.

More realistic is that the UK could approve chemicals faster than the EU, which might bring incremental benefits for UK farmers and the environment — and potentially increase the attractiveness of the UK investment climate at the margin. 

One concrete example of this in action was Revysol, a high-end BASF fungicide used in crop protection that entered into the regulatory clearance process in the EU and the UK at the same time shortly after Brexit but emerged much faster from the UK system, despite the same rules being applied to register it. 

It should be possible for the UK regulators to be faster than the EU in pushing registrations through the system — maybe up to two years faster, it was suggested — although it’s worth noting that during EU membership the UK regulator was already faster than other EU regulators anyway in approving chemicals, according to Bench.

The other EU-sized elephant in the room, as far as Brexit was concerned, was the reality that companies such as BASF were going to have to regulate to EU levels anyway in order to access the single market. That ultimately places limits on the regulatory arbitrage opportunity for the UK. 

This is so even when the EU is about to make its own regulation of chemicals more onerous as it rolls out the implementation of its new Chemicals Strategy for Sustainability (CSS), which was adopted by Brussels last week.

The UK could take a lighter touch as it considers how to regulate new chemicals coming on to the market, but chemicals are truly global products. If BASF is having to do the work to comply with EU standards anyway, the utility of a lighter UK standard is marginal.

And indeed, to the point about needing speed and clarity, the UK chemicals industry is still waiting for Defra to clarify how exactly it must register existing chemicals after Brexit following the UK’s decision to quit the EU’s REACH chemicals database and set up its own copycat version, which the industry says it will take £1bn to build. So much for nimbleness.

Ultimately for BASF’s Birk there will be some benefits out there for the UK, but to access them the government needs to think how it better integrates its international trade and domestic regulatory policy in order to achieve an end-goal that is still in need of some definition.

Birk attended this week’s Global Investment Summit and listened closely to Boris Johnson’s typically ebullient but scattergun speech, which he observed seemed to want to be everything to everyone.

He came away with the strong impression that while at a narrow tactical level (push for nimbler regulation) the UK approach might be clear, at the strategic level it was much harder to discern a grand plan.

“The UK as a country needs to decide what it is we really want. What do we want to achieve, in order to create an environment that is positive and innovative?” he said, before adding as an afterthought: “Does that mean the manna will be falling from the sky? Probably not.”

Brexit in numbers

This week, as my colleague Valentina Romei reported, the Office for National Statistics injected some fresh statistical meat into the debate over UK lorry driver numbers.

The ONS found that, since June 2017 when numbers peaked at 321,000, the profession has shed 53,000 drivers — of which 12,000 were from the EU.

But the other half (or more accurately three-quarters) of the story is the number of older UK drivers that have come off the road — of the balance of 41,000 drivers that have left, 34,000 came from the 46 to 55 age group.

What does this tell us? Well as trade group bosses told the BEIS select committee this week, it puts the UK industry in a pretty bad place. When you add EU departures (which are no longer being replenished because of Brexit) to the continued decline in UK driver numbers, it is clear that solutions are some way off.

A very similar situation is happening in construction and the meat processing industry, where structural shortages of skilled labour that were visible before Brexit and Covid-19 have become acute, with no obvious shortcut to a healthy balance.

Duncan Buchanan, director of policy at the Road Haulage Association, told MPs that things “are not visibly getting better at this stage”, and the government’s offer of 5,000 “Christmas” visas that expire on February 28 would make no difference. 

Indeed, as Buchanan observed of the scheme that is simply too short-term to attract drivers: “If you were designing a visa system to fail, you’d design it something like this.”

There are solutions, but they require patience and strategic thinking. Clearing the backlog of driver tests, and expediting the route to driving an articulated lorry (announced this week) will help to a point. 

Logistics UK, the trade group, is hopeful some benefits from this will feed through towards the end of next year, although The Grocer reports that hundreds of HGV testing slots are going unused every week, which doesn’t inspire total confidence.

But longer term, there are deep structural issues that will need to be addressed — like ending the snobbery over “level 2” qualifications that the government has arguably fuelled with its sneering attitude to “low skilled labour”. Little wonder that not many British kids want to sign up to be lorry drivers, and those that do, often don’t stick at the job, according to Buchanan.

Remember, as Buchanan pointed out, the profession has to compete for drivers with other (often more attractive) day jobs, like being a delivery driver or refuse lorry driver, that get you home each night.

Better truck-stop facilities are key to encourage those drivers to spend nights away from home. The government pays lip service to better truck stops, but has failed materially to back this with action, according to Sarah Laouadi, head of international policy at Logistics UK. 

As Buchanan observed, when it comes to planning, the truck parking stops are often the first thing to be chopped in any development, because they take up a lot of space and don’t bring in anything like the revenues that other elements do. 

As a result, the market alone is not delivering them — as this great exposition of the problem by Shane Brennan of the Cold Chain Federation explains.

Laouadi of Logistics UK recalls that ministers announced in 2018 that they were launching a work programme aimed at delivering an additional 1,500 overnight parking spaces — but these have yet to be delivered.

The industry says it is committed to addressing these issues, but it will take time, both to build the infrastructure and engineer a cultural shift in attitudes towards driving. Which is why the industry wants temporary visas to cover the shortfall, or an adjustment to the Shortage Occupation List that lowers the immigration bar for scarce jobs. 

But for now — as Tom Pursglove, the immigration minister, told MPs this week — the government remains unmoved.

And, finally, three unmissable Brexit stories

Angela Merkel has intervened to ease tensions between the EU and Poland. Speaking ahead of today’s European Council meeting in Brussels the German chancellor said member states needed to find ways to “come together again”.

Jonathan Powell, the former chief British negotiator in Northern Ireland, wrote in the FT this week that the UK and EU could be negotiating for years or even decades and that David Frost’s approach to the talks “is risking a full-scale trade war”.

The only thing quicker than the rise of Sebastian Kurz was his downfall. As Austrian state prosecutors investigate corruption at the heart of his government, Sam Jones explains the events that led to the spectacular fall of the 35-year-old former chancellor in this big read.

This article was first published at https://www.ft.com/content/7111be0f-790b-4698-8ebd-41cf21626fc9

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