The West Midlands business epitomises the struggle of small UK firms facing Brexit uncertainty, but the chemical company has more than a century of experience to draw on.

Family-owned Robinson Brothers has brought stability and jobs to the West Midlands for 150 years, manufacturing speciality and fine chemicals in the industrial heart of England known as the ‘Black Country’.

Charles Dickens described the area as "a cheerless region where not a blade of grass was seen to grow". But Robinson Brothers’ chemical plant is seen as a reliable employer by the 250 staff who depend on it for their wages.

The business – started in 1869 by brothers William, James and Charles – has survived two world wars, the 1930s depression and the 2008 economic crisis. Now it faces a very different threat: Brexit.

"What has characterised Robinson Brothers over the years is the ability to adapt," says Marc Robinson, a non-executive director and the fifth generation of Robinsons to sit on the board. "It started as the Coventry Gas Works and has mutated several times to become what it is now. Brexit may involve further evolving but we have every intention of surviving."

Exactly how that survival plan unfolds depends largely on UK exit negotiations with the EU, however, with just over a month before 29 March, Prime Minister Theresa May is still trying to close the deal, offering MPs a fresh vote by 12 March.

"I’d just like to know what’s going to happen, either way," says Adrian Hanrahan, Robinson Brothers’ managing director, based at the West Bromwich site.

Mr Hanrahan, an Irish-born chemist who helped set up a distribution business in India, has been at the company since 2003 and managing director since 2008. In addition to the 250 staff at the West Bromwich site, he oversees another 38 at sister company, Endeavour Speciality Chemicals, which makes molecules used in fragrances and flavours.

The combined revenue of the businesses, owned by Robinson Brothers (Ryders Green) Ltd, is about £36m a year with profits of £2.7m to 3m, but the business and its employees are under threat from a deluge of Brexit-related costs and risks.

"I hope we don’t finish with a ‘no deal’, but I accept we’re coming out of the EU on 29 March and would prefer to have a three- to five-year transition period to sort everything out – because I think this is how long we would need," Mr Hanrahan says.

Like most of the 2,500 small and medium enterprises that make up 97% of the UK’s chemical sector, Robinson Brothers wants to nail down its post-Brexit survival strategy.

It is one of the UK's biggest independent manufacturers of speciality organic chemicals, supplying clients including large pharmaceutical and agrochemical companies. Among other things, Robinson Brothers adds the smell to UK gas.

A future linked to the EU
The company trades with China, South Korea, Taiwan, India, North America and Japan, but much of its market is in the EU. Many of its raw materials are transported through member states, turned into intermediates in the UK, then transported back into the EU by truck or plane, so the company’s financial future is inextricably linked to the EU-27.

As a result, Robinson Brothers has already lost three EU research and development projects linked to Brexit uncertainty over disruptions in the supply chain. Mr Hanrahan constantly fields calls from customers asking essentially the same question: How will he deal with potential supply shortages? There is no easy answer.

"Things are going to slow down," Mr Hanrahan told Chemical Watch during a trip to West Bromwich. "Our deliveries to our customers will slow down because we cannot get things through the supply chain as quickly as we could if we didn’t have Brexit."

Mr Hanrahan has been planning for a no-deal Brexit scenario since the June 2016 referendum, however, so he is prepared for the worst-case scenario: "It is a bit of an oxymoron statement, but the easiest thing to plan for is a ‘hard’ Brexit. If anything less results, then it’s a bonus." 

Stockpiling
An essential part of that no-deal planning has involved stockpiling.

Robinson Brothers has limited storage within its 15-acre facility. The company has a four- to five-month supply of stock on hand compared with the usual six-week supply line. There is no storage room left onsite or through service providers.

"In fact, I don’t think there’s any refrigeration available left in the UK at present," Mr Hanrahan says. "And warehousing around here? Forget it. You cannot get any."

He says he has been ruthless in deciding which products to warehouse versus what Robinson Brothers would ideally like to have on hand. He’s also helped clients stockpile in their own facilities.

Some of Robinson Brothers’ European suppliers are keeping additional materials in the UK in case of delays after 29 March. Mr Hanrahan won’t, however, discuss what could happen to UK-EU trade in the event of grounded flights and 20km lines of trucks stretching to the UK's ports.

"That’s armageddon," he says, "and I cannot believe this will happen."

No-deal planning: OR or EU subsidiary?
In addition to stockpiling, Robinson Brothers investigated whether to set up an EU subsidiary, or use an only representative (OR) in the EU-27 to take over REACH compliance.

"You can set up a subsidiary from a commercial point of view. That’s quite easy. But from a compliance point of view, there’s a lot more involved. The costs are far greater and you need to have ‘personality’ in that company, which means you need people," says Mr Hanrahan.

In Germany, for example, UK companies require a minimum level of capital to set up and would need to consider the language of operating and documentation. Many UK companies have looked at either Ireland or the Netherlands as potential bases, but setting up a subsidiary is not as simple as setting up a shell company or a post box.

In the end, Robinson Brothers decided to use an OR in the Irish republic, but that too has drawbacks.

"One of our biggest concerns in terms of an OR is giving up our intellectual property, particularly with our registrations," says Mr Hanrahan.

Administrative burden
Staffing and administration have been equally vexing problems for UK companies planning for a no-deal Brexit scenario.

Robinson Brothers source about 130 raw materials from outside of the UK, 81 of those from the EU. In a no-deal scenario, the UK would be considered a ‘third country’ so the firm would have to start importing themselves.

That means hiring two or three more staff to cope with paperwork and administration – probably costing the company another £60,000 to £80,000 a year. A no-deal Brexit under WTO rules would put severe pressure on cash flow because there would be a bigger time lag between paying duty and VAT and recovering both.

‘BREACH’
All of the additional costs and headaches pale in comparison to what is potentially the biggest financial threat of a no-deal Brexit, however: REACH compliance.

If there is no agreement, companies operating in Britain will need to register substances under a new UK-REACH system at a cost, on average, of about £70,000 a substance, per company. The British Association for Chemical Specialities (Bacs) has estimated that the total bill for the sector could rise to £1bn (€1.13bn).

The figures are eye-watering for Britain’s small- to medium-size chemical companies.

Robinson Brothers has already spent £1.55m complying with EU-REACH since 2010, a sizable amount for a company with profits of about £3m a year.

The costs of duplicate registration for Robinson Brothers would be £650,000, Mr Hanrahan estimates. Half of that would be for product registration and half for test data for one product where the company currently has a letter of access but does not own the data.

Instead of UK-REACH, Mr Hanrahan has taken to calling the new UK registration system "BREACH".

'Paddle your own canoe'
Industry trade groups Cefic and the Chemical Industries Association have lobbied the UK for months on the issue of duplicate REACH registrations, hoping for an agreement that would allow the transfer of registrations from the EU database to a new UK database. So far, no deal has been agreed with Echa.

But what about the UK government’s technical notices for companies in the event of a no-deal Brexit? Are the answers to be found there?

"What can the UK government do?" says Mr Hanrahan. "They are in a mess. We are in a mess as a country. They are giving us direction as to what you should be doing … The advice is really: ‘Paddle your own canoe."

"We are where we are," he adds. "As of 29 March, it’s going to happen either with a deal or without."

And in April, Mr Hanrahan will do what he has done each spring for the last decade: address the Robinson family at its annual general meeting. Eighty percent of those at the AGM will have family ties to the company’s founding brothers William, James and Charles.

The shareholders, ranging in age from three months to 87-years-old, will be asking the same question Robinson Brothers’ staff, customers and Mr Hanrahan himself have been asking every day for almost three years: How will Brexit affect the business?

By April, Mr Hanrahan hopes he will have a firm answer, both for the Robinson family members and for the sake of their employees.

"That’s what keeps me awake at night – 250 families are dependent on us here in West Bromwich and another 38 at Endeavour. I just want to keep supporting them and do what we can to keep their jobs secure," he says.

"Robinson Brothers is a family business and the family shareholders believe in keeping the business in the UK and keeping people employed in this area."

"And that’s what we’re doing."

Copyright 2019. This article is republished with the permission of Chemical Watch www.chemicalwatch.com. 

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