Brexit: In, out, shake it all about

Written by: Matt Clay | Published:
Image courtesy of Alamy

On June 23, the British public will vote on whether to remain a member of the European Union, or to leave it. What implications will either outcome have for the UK waste management and recycling industry? Matt Clay investigates

Ahead of this month’s EU referendum, many UK citizens could be accused of taking part in the Hokey Cokey. Whether it’s to vote in, or to vote out, there has certainly been some political shake-it-all-about as the campaign groups ramp up their efforts.

A YouGov poll carried out towards the end of May showed the remain and leave campaigns were both at 41%. Britons seem divided straight down the middle on whether to stay part of the European Union or to leave the 28-country membership.

A shorthand version of the latter option is Brexit, merging the words “Britain” and “exit” – similar to the portmanteau of Greece’s mooted exit: “Grexit.”

Even major political figures from the global stage have waded into the debate, with US president Barack Obama supporting the remain group, alongside prime minister David Cameron, suggesting the UK is stronger as part of the larger EU.

The initial question most people have been asking is how would a Brexit affect me personally, or my family? The remain group has been strongly criticised for basing its campaign material on fear – detailing how much individuals will be worse off out of the EU, or how much their house prices could drop. While the leave group has been quick

to point the finger at how much it costs taxpayers to be an EU member: estimates suggest £280 million per week, taking into account EU rebates.

The question many in the UK waste sector will also be asking is how could a Brexit affect business? After all, whether a fan or not of regulation from Brussels, it cannot be seriously argued that the Landfill Directive has had a negative impact on the country. Raising the price of landfill has helped divert materials elsewhere and increase recycling rates.

Impact on investment

If the UK remains in, then further regulation could follow if the country signs up to the EU Circular Economy Package. Under this, the European Commission is considering a household recycling target of 65% for 2030.

However, if the UK leaves there are questions over whether the industry would still be subject to the various EU directives and targets. The Treaty on the Functioning of the European Union provides for a two-year process to negotiate the terms of an exit, which many have predicted could lead to considerable uncertainty during this period.

Mark Wilson, partner at Catalyst Corporate Finance, says there is concern from an investment point of view.

Speaking to RWW, he says: “From a financing perspective I think that anything that is disruptive to a normal course of play or introduces uncertainty is always going to have some sort of effect on investment decisions. For my clients – overseas clients looking to get into the UK – one of the first issues on the agenda are views on Brexit. I’m not saying that they necessarily believe that the investment opportunity becomes less attractive, but there are issues over pricing, foreign exchange and the position of sterling before or after the decision.”

Investment to one side, Wilson believes that EU membership has been a driver for the country’s environmental improvements.

“Certainly I think that European legislation has been a massively positive initiative for UK plc and the environment in general,” he says. “If you look at the success of government before we were part of Europe, there was a reluctance to address many environmental issues and therefore our seas were very dirty and polluted. And we had absolutely no inclination to recycle or treat waste as a resource. So I think Europe tends to be slightly more advanced and progressive on environmental and social issues than the UK.”

Impact on waste trade

Another question that has arisen is how a Brexit scenario would impact waste and materials that the UK exports to the EU and further afield, whether it’s processed plastics or refuse-derived fuel/solid recovered fuel (RDF/SRF). For example, in 2014 over two million tonnes of RDF was exported from England and Wales to 12 EU member states.

Angus Evers, co-convenor of the UK Environmental Law Association’s waste working party, believes the EU vote shouldn’t impact RDF exports.

“One reason for such exports is the shortage of facilities in the UK to treat such waste,” he tells RWW. “This shortage is more due to the uncertainties involved in the UK planning system rather than uncertainties around EU waste management law and policy, as the member states to which the RDF is exported (in particular Germany and the Netherlands) have managed to build facilities under the same EU legal and policy framework that applies to the UK. Leaving the EU may therefore have little or no effect on RDF exports, unless export and/or import tariffs were to be imposed, which could increase the attractiveness of developing new facilities in the UK in spite of the planning uncertainties.”

Evers believes it is further afield – trade in recyclables between the UK and non-EU countries such as China and India – that could be more cause for concern. “Such trading arrangements are currently covered by agreements between the EU and those countries, but if the UK left the EU then they would have to be based on international treaty arrangements or the World Trade Organization, none of which have such well developed legal enforcement mechanisms or courts compared with those within the EU.”

Slowing down the pace

Others agree that a Brexit wouldn’t affect the trade of RDF. Alon Laniado, investment director at Eternity Capital, says: “A Brexit scenario is unlikely to pose immediate shocks to the UK waste sector. It’s hard to see the Treasury dropping landfill taxes, which has been the pillar policy that transformed the industry into a processing one. Similarly, the UK or EU won’t be too tempted to impose tariffs or other barriers on the millions of tonnes of UK-produced refuse derived fuels that feed continental incinerators, given they offer a win-win solution. The likely negative impact on the economy and exchange rates will impact the waste sector, for example through lower commercial & industrial waste volumes and higher RDF prices.”

He adds that a “sovereign UK is less likely to impose the landfill ban on organic waste that is currently being discussed in the EU commission”.

In terms of the major waste management companies, ahead of the referendum FCC released a report entitled ‘Mapping the politics of waste’. Kristian Dales, communications director at FCC, says that ongoing industry issues won’t be fixed by the vote.

“The industry faces a number of system constraints – weak policy, outdated legislation, devolved agendas, a lack of leadership on vision or strategy – and an in/out vote is not going to fix that anytime soon,” he says. “Because of this, the EU referendum vote could be perceived as a red herring. But it does offer the opportunity, regardless of the outcome, for the industry to re-engage with government. Post-referendum, it is likely there will be a change in political dynamic – potentially a reshuffle or change in party leader depending on the outcome – and this could prove fortuitous timing to push for a united call to action.”

Stalling the circular economy

Meanwhile, in April the House of Commons Environmental Audit Committee published a report, ‘EU and UK Environmental Policy’. Signed by all but one of the committee’s 15 MPs, it was in strong favour of EU membership for the UK.

Responding to the report, David Palmer-Jones, UK chief executive of Suez and also the president of the European waste management trade body FEAD, said a Brexit could slow down the country’s move to a circular economy.

“Should the UK referendum be decided in favour of a Brexit and the UK leave the EU, there is a clear risk that the current EU-led policy drives towards creating a circular economy within the UK will stall or even move back a step, which in turn could have a negative impact on future investment decisions on UK infrastructure,” Palmer-Jones is reported to have said.

Clearly, as the June 23 deadline approaches, senior figures in the UK waste management industry are joining the debate.

Although waste companies have been reluctant to share their views in the past, clearly the importance of the vote and potential impact on the sector is encouraging them to show their hands.

Regardless of the result, and whether you are going to vote to stay in or out, there will no doubt be some shake-it-all-about as the referendum provides uncertainty for a sector governed by the EU since 1973.

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