Roundtable: What could Brexit mean for the UK’s mining industry?
Ledetta Asfa-Wossen asks the experts what Britain’s departure from the EU could mean for business, R&D and health and safety in the mining industry.
The mining industry is highly international. While the sector is heavily financed out of London, the UK doesn’t produce many commodities and UK/EU trade is limited. In the long term, it seems as though Britain’s departure from the EU will leave the sector largely unscathed. In recent months, the UK’s key trading partners – Canada, India and Australia – have all shown promising signs of allegiance. But there is no denying that research and funding could suffer significantly with the loss of a solid EU presence.
On mining R&D, funding and knowledge transfer
MR: It will be a real loss for British expertise to lose EU funding and integration – both for the UK and the EU. Both academic and commercial centres of excellence will have to find new ways to support research and development initiatives. They may also find themselves excluded from larger and longer-term EU programmes, where both size and international co-operation have proven to be of critical value over the last 40 years.
Many British entities, from companies to universities, have almost no direct expertise or presence in Brussels and have relied entirely on systematic institutional support arising from the UK’s EU membership to work successfully. Rapid change will be needed, whatever the detailed outcome, and that will be expensive and difficult as new structures and relationships are created.
FW: For EU research programmes, such as Horizons 2020, the European Fund for Coal and Steel and Interreg programmes – it has so far been business as usual. These important projects involve academic and industry partners, who may be companies looking for innovations to improve their processes or consultants looking to take a lead in their field. Current projects are proceeding as contracted and we are continuing to apply into the new EU grant rounds.
I’m sure that universities will be campaigning for the UK to remain in flagship European research programmes such as Horizons 2020. If we were not part of these EU programmes, then opportunities to collaborate on applied mining research projects with our European colleagues would be significantly reduced.
On trading internationally, mining exports and regulation
TA: Brexit in itself should not have any material impact on the mining industry, but it will create short-term impacts, some counterintuitive. For example, the immediate shock of the Brexit vote added close to US$100 to the price of gold, and led to predictions of monetary easing to counter the shock, leading to most of the metals complex trending higher. So the threat of negative economic news had a short-term positive sector impact.
In the long term, the broader issue of EU economic stability, and the actual process of the Brexit implementation, could have an effect if it leads to negative economic sentiment. In 2011, the risk of Greece's debt crisis negatively impacted the metals sector. Even though Greece did not have any material influence on metal supply and demand.
In the meantime, the primary macro drivers for the metals sector continue to be the trend of the US dollar and the health of Chinese economic growth. China continues to be the elephant in the room here, and its demand in metals is what rocks the mining industry and global pricing.
It’s now clear Brexit will happen. Hopefully it will be executed in a way that minimises economic shocks. As an optimist, I hope it will catalyse needed EU reform, and improve investor sentiment toward Europe, which has lagged global trends these past five years.
This will be good for metals. In any event, London will continue to be an attractive location for mining headquarters, with a vibrant mining services sector and a number of geographic and time zone advantages.
TH and NT: Plainly, Brexit casts a shadow of uncertainty over future exports to the EU. However, a high proportion of the output from the UK mining and minerals industry is consumed nationally rather than exported, and those materials, which are exported, such as potash and tungsten, are generally of high value and can continue to be sold widely on the international market. This will also be true of the products of ancillary industries, such as mining equipment. I therefore suspect that the mining industry is better insulated than most from the possible negative implications of Brexit.
Exports to EU and EEA member states could also be vulnerable to any tariffs and additional customs formalities, which might be imposed as a consequence of Brexit. However, it is pertinent to ask, what proportion of output is really exported to those countries?
MR: Business does not like uncertainty and that is the main issue for the foreseeable future. International mining companies are highly capable of realigning themselves to changed circumstances corporately, operationally and practically. But naturally, smaller operators or developers will not have that flexibility. Thus there is likely to be some dislocation until a new equilibrium is found.
Potential impacts relate more in my opinion to mining finance, investment and related services rather than physical mining in the UK. Whether they prove
to be negative to the global industry may require a longer view, as so many other changes are already afoot worldwide.
Remember, there is something of a dichotomy in UK mining. There are very big companies headquartered, listed and paying taxes in the UK,
but not mining there and conversely many operations including mines, quarries, minerals and even aggregates extracted by foreign-based companies,
are often from the EU.
In broader terms, there are existing examples of what may happen. For many Norwegian mining companies, the EU is the most important market. So EU laws, standards, regulations and practices are unavoidable. Norway's mining industry therefore remains not only an important member of Euromines, but very active in many spheres in Brussels so as to try and both protect and advance those companies' interests. Turkey is another example.
The UK does not produce vast amounts of mineral products relative to other global sources but has a reputation for quality, integrity and reliability. New niche markets may open up but it is difficult to see how the current focus will change markedly.
Again, without wishing to speculate unduly, I feel the risk is more to the downside as many of the UK's more established products are potentially substitutable from other EU sources and it may take some years for new projects and products to replace their contribution to GDP.
On health & safety and environmental law
TH: In the short and medium term, there is unlikely to be significant change as a result of Brexit. Most environmental law, and health and safety law, as it affects employment, is of EU origin.
The "Great Repeal Bill" announced by the Government at the Conservative Party conference is likely to keep this in force, as UK legislation, after Brexit. There is also likely to be limited appetite to change it, not least because a considerable portion was originally of British inspiration. Product safety law is also likely to remain much as it is, partly in the interests of future access to EU markets, and partly because existing EU legislation in this area is generally sensible and flexible