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The British safety watchdog has proposed not classifying lithium chemicals as “toxic” in a post-Brexit regulatory move that is set to bolster investment in the UK electric car supply chain.

Lithium is the key commodity for electric vehicle batteries, and governments across the world are offering massive subsidies and crafting regulations to entice investment in the mining of the metal, the refining of it into usable chemicals, and the construction of gigafactories.

In a potential divergence from EU regulation, the UK Health and Safety Executive (HSE) told industry last week that “no mandatory classification and labelling is proposed at this time” for lithium carbonate, chloride and hydroxide — key compounds used in electric vehicle batteries. Any classifying of lithium chemicals as toxic would require further consideration, added Britain’s workplace safety regulator.

That stance contrasts with a recommendation by the European Chemicals Agency (ECHA) last year to treat the three lithium compounds as “reproductive toxicants”, which sparked industry warnings that the EU could fall further behind China in securing investment in lithium mines and refineries.

One UK government insider confirmed the HSE had put forward “proposals” but said a final decision would rest with ministers.

Industry executives said avoiding labelling lithium as toxic would benefit prospective lithium refineries in the UK versus counterparts in Europe by lowering costs and providing regulatory certainty.

Roland Getreide, founder of Livista, a Luxembourg-based company which is planning lithium refineries in Europe, said that “it gives more competitiveness to the UK versus the EU in terms of producing lithium”.

Roland Chavasse, secretary-general of the International Lithium Association, a global trade body, said the lack of regulatory uncertainty in the UK “can only help” in attracting investment in mining and refining lithium.

UK lithium refiners are aiming to process modest deposits of the metal found in Cornwall and Durham, and bolster their operations by importing some of the mineral.

But the predicted size of the UK market for lithium used in electric vehicles is dwarfed by the EU. The value of the lithium needed to meet the UK’s electric vehicle production could reach almost $1bn by 2030, versus $13.4bn for Europe, based on estimates by CRU Group, a research business.

The HSE proposals follow the British government’s announcement that it would not match new EU restrictions on a number of potentially hazardous chemicals after establishing its own regulatory framework post-Brexit.

Environmental campaigners are alert to any potential weakening in the UK of EU-era rules, and complained this week when ministers announced changes to “nutrient neutrality” regulations to allow more housebuilding despite concerns about potential run-off of nitrates and phosphates into rivers.

Besides lithium’s growing use in batteries for electric cars and energy storage, the mineral is used to treat mood disorders. Studies of such patients have formed a body of scientific evidence that has made regulators worried whether interaction with the substance harms fertility and unborn children.

EU concerns were stoked by a 2017 academic paper on the impact of lithium on pregnant women’s children in the US but the HSE considered another 2017 study conducted in Europe that cast doubt on the mineral’s role in causing problems for newborns, according to three people familiar with the matter.

The HSE said there was “no substantial difference” between the UK and EU proposals and that mandatory labelling of lithium compounds was “paused” while the UK watchdog considered further information. It added that “while this process is ongoing there will be no reduction in existing protections”.

A European Commission decision on the ECHA recommendation was due to be announced at the end of last year but has been delayed. A commission spokesperson said this was because the 2017 European study had come to its attention but had not been included by the ECHA in their assessment.

Classifying a chemical as a hazard also creates a legal obligation for companies to try to substitute the substance — something seen as very difficult for lithium in batteries over the next decade.

However, UK car industry executives believe the HSE proposal alone would hardly shift the needle for Britain as the car industry aims at a tricky transition to electric vehicle manufacturing, given the gravitational pull of the EU market.

Mike Hawes, chief executive of SMMT, the UK automotive trade body, warned that “regulatory divergence can bring additional cost, uncertainty and risks undermining investment”.

Violaine Verougstraete, chemicals management director for Eurometaux, Europe’s metals association, said a “predictable and proportionate” regulatory framework was vital for Europe, including avoiding regulatory “divergence” between the EU and UK, so as to compete in a market dominated by China.

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