The vote means massive uncertainty for an industry dominated by EU rules, but it also brings big opportunities. By Dominic Watkins.
For an industry that is almost 100% regulated by EU laws, the impact of Brexit could be substantial. Of course, my crystal ball is no better than anybody else’s. And despite all the “we will thrive” comments emanating from Downing Street, no one knows just what the effects will be and how long they will last.
Theresa May’s new cabinet is confronting a gargantuan task, with a vast amount of work to be undertaken and some big questions facing the country. Notably:
- Will Brexit have a long-term effect on the economy? Possibly.
- Will there be another Scottish independence referendum? Looking likely.
- Will Northern Ireland want to leave the UK too? Quite possibly, and ditto Gibraltar.
But those in the food sector will be wondering what the trading and regulatory landscape will look like in the future. We don’t know. That’s a concern, but more alarming is that, at the time of writing, there doesn’t appear to be a plan. All this uncertainty creates both risk and opportunity for businesses.
So what happens now?
To leave the EU the UK government has to serve notice under article 50. From then the UK has two years to negotiate its exit. The UK would be expected to revert to individual membership of the World Trade Organisation (WTO), which would require certain commitments. However, the UK would also seek to secure certain minimum standards in terms of its relationship with the EU and other WTO members. Until now, the UK’s trade relationship with the other WTO members has operated through the EU’s WTO membership.
Worst of both worlds
Other European countries such as Switzerland and Norway have their own relationships with the EU. These have been painstakingly negotiated over years and could offer example frameworks of what might in theory be achieved – in time.
In return for free movement of goods there are many conditions to be respected, including respect for competition rules and other regulatory controls. Let’s not forget that the UK would not be afforded a seat at the table to negotiate the content of the regulations that it is bound by. Some might call that the worst of both worlds.
Overlapping this is consideration of how the UK’s legislative regime will look post-Brexit. Much of our food law is EU regulation, which when passed by the EU automatically comes into force here without need for any UK law. This presents the possibility of a legislative gap to be plugged.
One solution is the “cut and paste” approach: in other words, create legislation to replicate the EU requirements domestically. Another is to just allow the existing EU law to apply on an interim basis. A third option is to properly analyse the regime and determine what should remain. Such a consideration would be costly and time consuming, but if the UK is serious about presenting itself as a more attractive market then this could be a way to create opportunity for business.
The issue and the opportunity
Where could the opportunities lie? When we conducted our research with food manufacturers, 64% agreed that the limited changes introduced by the EU food labelling regulations imposed a disproportionate cost to businesses compared with the benefit to the consumer. Just under half (48%) saw EU packaging and product regulation as a threat to growth. So could our exit from the EU allow food manufacturers to cut costs?
The only answer, once again, is possibly. But consider the graphic above, which represents just some of the areas covered by EU regulation, and the scale of the task facing the government begins to emerge. And food is just one area of regulation.
To my mind, given that we want to trade with the EU it’s unlikely that we will stray too far from EU regulations. It would actually be unhelpful in many cases to business if we did – increasing costs through dual standards. Having said that, if there are areas where adjustments can be made, now is the time to bring them to the government’s attention: an opportunity which the Food and Drink Federation has already tried to seize.
For instance, many marketing teams would love to hear that, provided they had objective substantiation, they were permitted to advertise any health or nutrition claim they desired rather than just the limited list the EU permitted. Their flexibility and creativity may still be inhibited by regulators such as the Advertising Standards Authority, which may just look to the EU approved list for guidance on what is and what is not misleading and enforce accordingly, but again there is opportunity.
Dominic Watkins is head of the food group at law firm DWF.