ACS Industry

An Uncertain World: Brexit’s Potential Impact on the Chemical Enterprise

Blog Post created by ACS Industry on Aug 25, 2016



"Don't it always seem to go that you don't know what you've got till it's gone?" -Joni Mitchell


The UK’s decision to leave the European Union (commonly known as Brexit) is set to have far-reaching impact around the world.  As President Obama said before the vote, “This is a defining moment and what happens in Europe has consequences around the globe."  And as Reuters has warned earlier this month, the Brexit vote may also signal a shift in the tectonic plates that have driven the movement towards greater European unity over the past 50 years:


“Brexit is the most visible sign of a wider decline in the ideal of ever closer European integration around the continent”.


One of the major concerns is the likely long, drawn-out timescale for the exit.  New premier Theresa May has sensibly postponed pressing the actual “exit button” (which is achieved by invoking Article 50 of the EU Treaty). But her main reason for postponement is that nobody has yet defined the UK’s objectives in negotiating the necessary post-Brexit arrangements.  Those proposing Brexit during the referendum never got around to explaining their plans for the UK outside the EU.  And since the vote, it has become clear this was because they couldn’t agree amongst themselves on a potential way forward.


A veritable smorgasbord of options are now under discussion as a result:

  • At one end of the spectrum there is “EU-lite”, where the UK would accept current EU rules but not be able to influence any changes that are made
  • At the other, there is the option of total withdrawal from all current EU arrangements - after which, the UK would then apply to join the World Trade Organisation
  • A further practical problem is that the UK has not actually negotiated any trade deals on its own since joining the EU in 1973.  Not only does it not have any experience of how these are conducted, but it doesn’t even have any trade negotiators


Brexit is therefore almost certainly going to be a major self-inflicted wound for the UK economy. Already some foreign-owned companies are preparing plans to exit the country in order to maintain their access to the EU’s single market.  They fear that UK-based companies could lose their current right to sell products and services across the EU’s Single Market of 500 million people without tariff or regulatory barriers.


Another key area of concern, particularly for ACS members, is clearly around the future status of the research money that the UK currently receives from the EU’s Horizon and other funding bodies.  It has received €6.7bn ($7.5bn) since 2013, and currently gains about one-fifth of all European Research Council grants.  The vice chancellor of one top UK university told me shortly after the Brexit vote that two potential European partner universities had already withdrawn from joint funding applications, citing the uncertainty over whether the UK will still be eligible to participate.  And he is not alone, with Prof. Philip Nelson, chairman of Research Councils UK, telling the UK Parliament that 6 vice chancellors had received similar messages.


A further problem arises over people issues.  2.1 million EU nationals currently work in the UK, due to the freedom of movement guarantees.  1.8 million UK citizens also live and work in other EU countries on the same basis.  But as of today, nobody knows what their status will be post-Brexit.  This is already becoming a major barrier to future recruitment, as there are no guarantees that peo0ple moving countries will be able to stay post-Brexit.


If you think this is all potentially shaping up to become a complete mess, you would not be alone.


Even where positive noises are being made by government, there are few details available of what is being considered.  The UK’s science base is widely recognised as being Number 2 in the world, after the USA. It currently spends around £6bn/year ($7.8bn) on research and innovation, and May has pledged to maintain government funding at this level in real (i.e., inflation-adjusted) terms.  But this doesn’t mean, of course, that everything will simply continue on the same basis as today.


The UK is heading into a very uncertain world, where there are no precedents for what might happen.  I discussed some of the wider economic and political issues involved in last month’s “ACS Chemistry and the Economy” webinar, and you can listen to the recording and download the slides by clicking here.



Paul Hodges is chairman of International eChem (, trusted advisers to the chemical industry and its investment community. He is a member of the World Economic Forum’s Industrial Council on chemicals, advanced materials and biotechnology, and presents the ACS ‘Chemistry & the Economy’ webinars.