U.K. Chemicals at Risk From Brexit-Driven Investment Cuts

(Bloomberg) -- The U.K.’s $50 billion chemicals industry is at risk of withering away if Brexit isn’t handled properly, according to an industry expert.

“My major fear is that non-U.K. companies will be afraid to continue their investments inside the U.K.,” Andreas Gocke, a senior partner and chemicals specialist at Boston Consulting Group, said in a phone interview. “The chemical assets are smaller and an exit won’t be as obvious and may not be as visible to the public and press.”

Alongside a handful of sizeable British chemical companies, the U.K. is home to a myriad of small business units owned by international entities, according to Gocke. That puts the industry at risk of small yet plentiful cutbacks that could fly under the radar. In contrast, a foreign-owned company in the aerospace or car industries may have one large plant and closing it would create an outcry in the public domain and media, he said.

The lack of clarity surrounding the terms of the U.K.’s exit from the European Union risks leaving the chemical industry in “disarray,” Environmental Audit Committee Chairwoman Mary Creagh said last month. The uncertainty could cost the taxpayer millions of pounds, she said.

The U.K. chemical industry is already a shadow of its past. The nation lost its talisman Imperial Chemical Industries in a takeover in 2008 and the oil-and-gas majors have sold off large swathes of their downstream operations. Depending on the final Brexit deal with the European Union, chemical companies may reinvest less in state-of-the-art technology or de-bottlenecking, resulting in lower competitiveness of their sites, Gocke said.

“It’s widely known in the European chemical industry that these companies have prepared different investment scenarios already,” he said.

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