With the UK no longer being a member of the EU it has entered a transition or “implementation” period agreed in the UK–EU Withdrawal Agreement during which the UK continues to be subject to EU rules and remains a member of the single market and customs union.
This allows the UK to continue its current trade deal with the EU while their future relationship and security co-operation are negotiated.

Strained ties with EU trade partners spark concern

Brexit has already had a significant effect on the UK mineral industry with market conditions and the ongoing uncertainty surrounding Brexit driving UK-based operator Sirius Minerals to cancel a US$500m bond sale to finance its polyhalite Woodsmith project in North Yorkshire in September 2019, a mining project which would have become the biggest in the UK.

The main causes for pessimism are already weak construction and housing markets and the potential for higher trade tariffs. While the mining industry is a global industry and somewhat protected, any lingering uncertainty until new trade deals are arranged will be seen as negative.

According to statistics by the House of Commons Library, published in December 2019, the EU is considered the UK’s largest trading partner with UK exports to the EU in 2018 being £291 billion (45% of all UK exports) and UK imports from the EU being £357 billion (53% of all UK imports).

This reinforces the significance of the UK-EU trade relationship, which despite government attempts to outline clear strategies, has made EU traders unsure of the future trading prospects with the UK.

The International Monetary Fund has also reported in its “World Economic Outlook” that increasing trade barriers are a factor for the “synchronised slowdown” in the global economy which led to expectations for growth in 2019 being downgraded to 3%.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

Negative impact on small companies and future research at risk

According to analysts S&P Global, an already unsteady market hit by ongoing trade wars and geopolitical crises was further disturbed by the uncertainty caused by Brexit. In turn, S&P see this putting an additional burden on smaller UK operators with recent market volatility making it more expensive for them to participate in drilling contracts made in dollars.

Brexit has also made it harder for smaller companies to attract financing in the past couple of years following the collapse of the pound sterling after the Brexit referendum on 23 June 2016, when the value of the pound fell to 30-year low of $1.33. Despite recent fluctuations, the pound currently stands at $1.31, with prospects following the end of the transitioning period remaining unclear.

Another field that might suffer as a result of Brexit is research and development (R&D) in the industry. Mark Rachovides, president of Euromines, the European metals and minerals mining company, previously shared with Mining weekly that much of the current innovation in mining development is attributed to the UK’s collaboration with EU research institutions over the past 40 years.

In addition, there is a good chance that less funds will be available for the establishment of such projects and it might become more difficult for the UK to keep pace with international technological developments in the industry.

Could Brexit result in increased investment in UK mining?

On the other hand, a combined 39% out of the readers who voted in our poll believe that Brexit will positively or slightly positively impact the UK mining industry.

With the Office for National Statistics’ (ONS) awarding the UK mining and quarrying industry a score of just 10% on their disruption index published in Autumn 2019 (using 2017 figures) – measured according to a scenario where the UK reaches a deal – it’s not a surprise that a substantial number of people believe the country’s exit from the EU may not have a bad impact on mining.

Despite the fact that EU investment in the UK mining sector decreased by a third from £52.5bn in 2015 to £35.2bn in 2017, as a result of the referendum, the total market capitalisation of AIM mine operators increased from £3.9bn on 23 June 2016 to £4.6bn a year later, according to the ONS survey.

A mixture of investors rushing to commodities as a safe haven investment and a low pound value making assets appeal to foreign investors are among the reasons there could be elevated interest in the UK mining industry.

According to analysis by research and development company Catax, released in February 2020, the UK’s mining and quarrying industry earnings increased by more than £2bn since the UK voted to leave the EU.

The industry remains hopeful that this will open new doors to future investments and partnerships with non-European major mineral traders such as China, US, and Australia. In addition, UK mining could benefit from UK-established mining laws and regulations which in the future can be specifically designed to benefit UK operators.