The impact of Brexit on the processed food and drink sector Contents

4Regulatory alignment

The risks of increased regulatory divergence

40.A great deal of food and drink regulation is currently set at EU level. A majority of stakeholders stressed that the EU’s impact on regulation had been positive for the food and drink sector, through geographical indicators, high food safety standards, harmonised food labelling,83 and already allowed some divergence.84 The Food and Drink Federation said

I wouldn’t say that there is any massive regulatory or other restriction that the EU places on us. […] The idea that the EU is a warren of red tape and regulation that restricts our ability to do stuff is simply not true.85

41.Witnesses across the board asked for continued membership or strong mutual recognition of EU regulatory bodies and for the UK to retain maximum influence on future EU standards.86 They also pressed the Government to avoid a regulatory cliff-edge87 and warned that it was imperative for mutual recognition of standards to continue:

Without an assurance that consistent regulation and mutual recognition will continue, or at least confirmation of this being taken into account in the phased process of implementation, there would be a considerable impact on the business, including future financial implications.88

Unilever added that “Any future potential dual regulation across the EU and the UK would lead to a cost burden and risk making the UK less competitive.”89 The manufacturers of alcoholic drinks we heard from wanted to keep the EU geographical indicators system and EU rules on category definitions to protect key UK products like Scotch or Baileys.90

42.Increasing divergence would add to non-tariff barriers according to our witnesses,91 who see regulatory convergence as a “guarantee of consistency”.92 Convergence minimises costs and administrative burdens for businesses, especially regarding exports.93 Stakeholders warned that diverging further might mean having to create separate products for the UK and the EU market—which would be possible for an sector used to adapting quickly to different national markets, but would create unwelcome additional costs.94 It would also mean potentially labelling products differently, which would not be welcomed by the manufacturers where previously they were able to sell the same products across the UK and the EU.95 For instance, Ferrero UK told us:

Were UK and EU labelling law to diverge such that future labelling schemes were not compatible, i.e. we had to have different products on sale in each country, the task of repackaging products from one market to the other could increase costs by as much as 10 per cent and reduce the number of different products on the market.96

43.Witnesses also stressed that if it led to a lessening of standards, divergence would not be tolerated by UK consumers, who are extremely discerning of the quality of food and drink products and expect high standards of animal welfare and food safety.97 In the words of the ALMR:

We forget the consumer at our peril. Whether we could, should or would diverge, the consumer will probably not let us diverge. Our consumers are very well informed when they eat out. A lot of them know the provenance of the food they are eating and do not want to go to any lesser standards.98

Witnesses associated EU regulation with high product quality and safety standards99 whilst the UK is renowned for high environmental and welfare standards.100 UK customers have shown that they would not tolerate lowering any of these standards, as made clear by the chlorinated chicken controversy. Insistence on maintaining our high standards may have an impact on our ability to secure advantageous trade deals with third countries.

44.We agree with the sector that overall the UK should stay as close as possible to EU regulations after we leave the EU. This would facilitate exports to the EU market and build on consumer trust for EU-branded products. Key EU regulations like geographical indicators must be preserved to maintain the competitiveness of flagship UK products and to allow UK consumers confidence in what they buy (eg. Cheddar cheese).

Opportunities from divergence

45.If done well, some future divergence could generate opportunities for improving existing regulation in a way that benefits UK consumers and businesses. This should be done only when and where this creates a real benefit to the UK or consumers as argued by one witness.101 The Prime Minister has been clear on the fact that the UK would not engage in a “race to the bottom in the standards and protections we set.”102

46.The Wine and Spirit Trade Association highlighted opportunities for divergence on EU food law, product definitions to boost British exports, and restrictions on imported wine in order to liberalise imports from non-EU countries.103 The Scottish Whisky Association told us that EU excise duty should be abandoned and duty-free arrangements between the EU and the UK should be reintroduced.104 However, along with Diageo, they stressed that domestic tax policies were also a constraint on their competitiveness and needed to be reviewed.105 Diageo told us divergence should be considered on a case-by-case basis and done only where EU regulation was unreasonable.106

47.Moreover, although further divergence could be advantageous for UK businesses selling mostly or solely to the UK market, it could come at a cost for businesses that export to the EU market. UK businesses would still have to abide by EU rules in order to export but the UK will have lost the ability to influence those standards.

48.We conclude that large manufacturers are already used to dealing with different regulations for different national markets and could probably adapt if they were given enough time and certainty to do so. Nevertheless, this is not something that all of them will welcome and it should only be done where it presents a clear advantage for British businesses and British consumers.

49.We recognise that there are opportunities to diverge once we leave the EU that would make some UK products more competitive, although these gains need to be balanced against any consequent reduction in access to EU markets. We welcome the Prime Minister’s assurances against any race to the bottom in standards. Our biggest concern is the impact on the 96 per cent of food and drink SMEs for whom having to deal with another set of regulations will be burdensome and costly. They will need Government support and time to adapt. As a result, we recommend that the Government seeks to secure mutual recognition of standards as soon as possible to provide these businesses with the necessary certainty.

83 Scottish Whisky Association BRF0018; Unilever BRF0019,para 21; Council for Responsible Nutrition UK BRF0016; GMB BRF0014, para 5; Wine and Spirit Trade Association BRF0011, para 3.1–3.2;

84 Q46 [Ian Wright]

85 Q36 [Ian Wright]

86 Unilever BRF0019, para 5; GMB BRF0014, para 19

87 Unilever BRF0019, para 21; Ferrero UK BRF0015, para 32; Food and Drink Federation BRF0010, para 46;

88 Unilever BRF0019, para 22

89 Unilever BRF0019, para 24

90 Scottish Whisky Association BRF0018; Q55 [Dan Mobley]

92 Ferrero UK BRF0015, para 13; Unilever BRF0019, para 21

93 Unilever BRF0019, para 21; Q43 [Ian Wright]

94 Q56 [Ian Rayson]

95 Ferrero UK BRF0015, para 15

96 Ferrero UK BRF0015, para 15

97 Unilever BRF0019, para 5; Food and Drink Federation BRF0010, para 3&20; Defra BRF0008, para 18

98 Q48 [Kate Nicholls]

99 Q44 [Ian Wright]; Q48 [Kate Nicholls]; Council for Responsible Nutrition UK BRF0016, para 12; GMB BRF0014, para 5; Wine and Spirit Trade Association BRF0011, para 3.1–3.2

100 Rich Energy BRF0013; Food and Drink Federation BRF0010, para 37; British Beer and Pub Association BRF0009, para 9; Defra BRF0008, para 4

101 Unilever BRF0019, para 24

102 Prime Minister’s Office, PM speech on our future economic partnership with the European Union, 2 March 2018, accessed 16 March 2018

103 Wine and Spirit Trade Association BRF0011, para 3.3&3.6

104 Scottish Whisky Association BRF0018

105 Scottish Whisky Association BRF0018; Business, Energy and Industrial Strategy Committee, Letter from Diageo on Leaving the EU: implications for processed food and drink sector, 19 December 2017

Published: 22 April 2018