Although the new KPMG study broadly confirms the Commission’s own impact assessment, it raises serious issues about the business impact of the proposed legislation on SMEs and downstream users.
The REACH impact study carried out by KPMG for the European chemical industry (CEFIC) and business association UNICE was made public on 27 April.
In the final report, KPMG insists that the study is not intended to provide a general macro-economic impact assessment resulting in loss of GDP or employment. It underlines the study only provides business case studies based on interviews.
Key findings of the report:
- The withdrawal of chemicals used as primary raw materials is deemed “unlikely”, contrary to previous industry allegations that some products would end up being pushed out of the market because of increased costs.
- Direct costs for registering substances to the future European chemicals agency were found to be “significant” for one individual chemical supplier (20% of annual turnover). For other suppliers, the report assumed they would “succeed in passing on” registration costs to customers without specific mention of particular difficulty;
- In terms of competitiveness, it emerged from the report that “the increase in product costs ranges from 6 to 20%”. However, these costs only have to be paid once, not every year, and they can be distributed over time (4% over five years instead of the full 20% over one year);
- “Delocalisation just because of REACH is unlikely.” But REACH “may add to delocalisation pressures, especially for commodities,” adds the report in a context note;
- Direct costs related to REACH are expected to “have limited impact on the profitability of the downstream users”. But, in a context note, the report adds that “even a low impact on profitability could be a serious issue” given the chemical sectors’ low profit margins and global pressures on profitability;
- On innovation, “no increase in R&D expenses are expected”, only “limited diversion of resources”;
- The report indicates “low vulnerability” to REACH compliance for large chemicals suppliers as far as availability of substances and raw materials are concerned. However, vulnerability was found for the two SMEs tested.