Brexit – towards the nuclear cliff edge

Tom Greatrex, chief executive of the Nuclear Industry Association, argues that any gap in the arrangements by which the UK nuclear industry co-operates with the world could cause considerable disruption  

There’s a common phrase popping up across many articles and interviews about Brexit – ‘cliff edge’.

Whether that’s the Institute of Directors, which said the two-year timeframe is unlikely to be enough to sever ties and form new trade deals; or EEF, the manufacturers’ organisation, calling for a five-year transition period to ease the uncertainty for businesses, they’ve all had this word in common.

The nuclear industry has also talked of an approaching cliff edge, a scenario backed by the both the Business, Energy and Industrial Strategy Select Committee and the House of Lords Science and Technology Committee.

That cliff edge was hidden in the small print of the supporting notes to the EU Withdrawal Bill, as it detailed how the UK will also leave the European Atomic Energy Community – commonly known as Euratom – at the same time as leaving the EU.

Readers might say: ‘So what?’ All industries are under pressure.’ But, Euratom is a fairly unique proposition for the government to contend with and the cliff edge in our scenario could bring nuclear trade to a halt.

Euratom underpins everything in the nuclear industry. It provides a framework for international nuclear safeguard compliance, undertakes inspections and reporting, and checks the right nuclear materials are in the right place to comply with the IAEA’s non-proliferation requirements.

It also establishes a common market in nuclear goods, services, capital and people within the EU. Importantly, Euratom also has established Nuclear Co-operation Agreements (NCAs) that enable trade with countries outside the EU, including the US, Japan, Australia and Canada. As well as promoting long-term R&D projects, notably the ITER fusion programme in the south of France and JET (the Joint European Torus) based near Oxford at the Culham Centre for Fusion Energy.

So, without a replacement deal for Euratom or flexibility around the two-year time limit set out by Article 50 for the negotiations, the UK’s nuclear industry faces a number of significant challenges.

In particular, normal operations such as the movement of people and equipment across borders will become more complicated, and the UK’s involvement in nuclear research programmes will also be uncertain.

Reassuringly, the government appears to be well aware of this, and the white paper that triggered Article 50 states Euratom is “an important priority” and “the nuclear industry remains of key strategic importance to the UK”. Furthermore the European Commission’s negotiation guidelines have opened the door for a transition period.

This is positive, but we’ve made it clear to the government it needs to be working on these replacement arrangements now to avoid the cliff edge. It is not likely to be an easy process, but what it does have in its favour is that securing agreements is not just in the interests of the UK, but the European nuclear industries we work with too. The nuclear industry is international and any disruption would affect all of us.

Linked interdependencies

The complications will arise as there are a number of linked interdependencies, meaning one phase will need to be completed before another can begin.

The first step in the negotiation must be agreeing a replacement Voluntary Offer Agreement with the IAEA for a new UK safeguards regime.

Once this is in place, negotiations can take place to agree NCAs, and gaining third country status to help facilitate nuclear trade between the UK and the European Union.

Third country status wouldn’t just benefit the UK – although for UK firms to continue to work overseas, we will need it. But for other countries to be involved in our £3bn decommissioning market or £60bn new-build sector or even to bid for contracts on existing power stations, they need us to have this agreement, so it would be foolish to make access more difficult.

The next stage of the negotiation will be agreeing a new funding arrangement for the UK’s involvement in the nuclear R&D programmes, which are funded by Euratom – ITER and JET.

For JET, having these agreements in place as early as possible will be vital. Its contract with Euratom runs out in 2018, but it was expected to be extended to at least 2020 and potentially further to 2024, meaning negotiations on this extension cannot wait until 2019.

However, it is very much in our European partners’ interest to resolve this issue. JET is feeding critical information to the ITER projects in the south of France, which would be lost if it closed early.

More generally, UK firms are also involved in the ITER project alongside many other international partners and have won contracts worth €500m, with this number expected to rise to at least €1bn. If the government has ambitions for the UK to remain a top-table nuclear nation, then continued participation is imperative.

Any cliff edge to the Euratom arrangements could cause real and considerable disruption in the UK and overseas. To avoid this the government now needs to work fully with the commission and member states to ensure alternative arrangements are in place as soon as possible with transitional agreements if necessary. Any gap in arrangements would damage the nuclear industry in the UK, the EU and internationally, which isn’t in anyone’s interest.