The fear of Great Britain leaving the EU in a disorganized manner becomes more and more of a reality with each passing day. This would entail the comeback of WTO tariffs for all commercial transactions to and from the UK. The consequences for the plastic industry would be disastrous not only in Great Britain but in the European Union as a whole.

The remarks expressed in this article are based on the most recent data published by the BPF (British Plastics Federation) and can be accessed online on their website.

Brexit: a bugbear for the plastic industry

Plastic industry is now the third sector of employment in the UK, considering it employs directly 166k people. If that number sounds too high, you should consider that the very existence of many other sectors depends on plastic materials: for instance, industries like automotive, aerospace, electricity, energy, medicine, packaging and agriculture wouldn’t exist without it.

With a total value of over 29 billion euros, the plastic industry is one of the most active and healthiest economic sectors in Great Britain. This is for sure the result of investments that over the years have changed many of the procedures and materials into the ones that are currently employed. But it doesn’t stop there.

The constant exchange of knowledge with the European Union played a fundamental role. It’s interesting to point out that almost 11% of the workforce employed in this sector comes from the EU. 19% of this portion of employees is highly specialized personnel (engineers and managers) and 25% is middle level (specialized workers). Brexit already raised the first concerns in the sector: before the referendum, half of the enterprises declared they had difficulties finding specialized personnel, and the percentage has now reached 2/3.

Brexit will make it harder and harder for Great Britain to interact with its most relevant partner. 65% of plastic products coming out of Great Britain ends up in the European market. Imports are even higher, reaching 69%.

What kind of impact would a Hard Brexit have on the plastic industry in the UK?

How much would a hard Brexit cost? 10 billion euros, more or less: meaning 35% of the value of the whole sector.

This value is limited to the results obtained by simulating the application of WTO tariffs instead of the ones currently in use. The loss related to a more complicated and scarce exchange of ideas and projects is inestimable.

It’s clear that plastic industry in the UK is highly influenced by its interactions with the EU. A Hard Brexit would risk sinking a flourishing market, threatening the well-being of the entire chemical industry in Europe.

Three entrepreneurs out of four, when directly asked by the BPF, revealed to be highly worried about a Hard Brexit, knowing which consequences it could inflict on business.

For these reasons, the director of BPF, Philip Law, has personally written a letter to the leaders of the most prominent political parties. His letter was published on the website of the Federation with the title “The plastic industry speaks to politicians: we don’t want a no deal Brexit”. It underlines how “the European Union is a key market, as many companies in the plastic and rubber sector have branches or parent companies in the EU. We encourage British political parties to consider with particular attention the results of our poll and the repercussions of a no-deal Brexit”.

What about Italy?

Italy currently gains 23 billion euros per year from goods and services export towards Great Britain.

A no-deal exit would imply a comeback of custom taxes and a consequent loss of competitiveness for the final products. According to Assocomplast’s predictions, the most affected area wouldn’t be the sales of plastic materials per se, but rather the connected mechanical sectors. Great Britain is the seventh importer of Italian technologies destined to the processing of plastic and rubber.

An unregulated Brexit is estimated to cause a drop in the total turnover that could almost reach 2 billion euros in the next 3 years. If it looks like a high figure, think back to the European sanctions on Russia: during the first two years of their enforcement, Italian export lost 3.6 billion euros. Another reason for which the general feeling among Italian entrepreneurs is not as negative as it is among their British equivalents.

Moreover, two other factors should be considered:

  • First of all, the British market is surely important for the Italian plastic industry, but not as much as the European market.
  • Furthermore, in the coming 10 years, a 282 billion drop in foreign direct investments (FDIs) in the UK is to be expected. These investments would be redirected to other markets, the Italian market included. Brexit should, in fact, lead to an increase in FDIs in Italy of 26 billion euros, which would result in our GDP growing by 0.4%.

Immeasurable consequences

Nevertheless, all the numbers and estimates presented in this article don’t take into account a fundamental side of this matter. There’s no mathematic calculation that could measure the negative impact of closing the borders once again:  the free exchange of ideas and knowledge was the greatest advantage of an open market. The consequences are still unmeasurable for now: we will know more after the new deadline of 31 October 2019.