On 23 June 2016 the UK voted to leave the European Union. This has left the country in turmoil, and it is difficult to predict just how far-reaching the effects will be. Will it have a long-term impact on the economy? Possibly. Will there be another Scottish independence referendum? It looks likely. Will Northern Ireland want to leave the UK too? Quite possibly, and the same for Gibraltar. But, more significantly, what will the trading and regulatory landscape look like in the future?
Worst of all, at the time of writing there does not yet appear to be a plan for the future. This means there is a vast amount of work for the Government to do before Brexit can occur, creating both risk and opportunity for the sector.
What happens now?
As we all now know, to leave the EU, the UK Government has to serve notice under Article 50 of the treaty. Once invoked, a two-year process is then triggered, in which the outgoing Member State (the UK) must then negotiate the terms of its exit with the EU, how the exit will be managed and what the future relationship will be.
The UK would be expected to revert to individual membership of the World Trade Organization (WTO), which would require certain commitments but would also seek to secure certain minimum standards in terms of the UK’s 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.
There are various models that the UK could adopt, view our summary table of the models here » Other European countries such as Switzerland and Norway have their own relationships with the EU, which have been painstakingly negotiated over years. These offer example frameworks of what might, in theory, be achieved in time. Of course, in return for the free movement of goods there are many conditions to be respected, such as competition rules and other regulatory controls, while at the same time not affording a “seat at the table” to negotiate the content of the regulations they are bound by. Some might say the worst of both worlds.
Overlapping this is consideration of how the UK’s legislative regime will look post-Brexit. As much of our legislation is dictated by EU regulations, this may fall away on leaving, and therefore a gap must be filled. But how? One solution is the “cut and paste” approach, to replicate the EU requirements domestically, another is to just allow the existing EU law to apply, while a third 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 being a more attractive market then this could be a way to create opportunity for business.
Issues and opportunities
So where could the opportunities lie? When we conducted our research with food manufacturers, 64 per cent agreed that the EU labelling regulations imposed a disproportionate cost to businesses compared to the benefit derived by the consumer, while 48 per cent saw packaging and product regulation as a threat to growth. So could our exit from the EU allow food manufacturers to cut some of the red tape and save costs?
Just looking at the technical food regulations reveals the scale of the task facing the Government. The table below shows the areas covered by EU regulations that, after Brexit would need action to avoid a vacuum. Whichever option the Government chooses, it is clear the scale of the task it faces.
It’s unlikely that we will stray too far from EU regulations, but if there are areas where adjustments can be made, now is the time to bring them to the Government’s attention. In other words, there is opportunity. For instance many marketing teams would love to hear that, provided they held objective substantiation, they would be permitted to advertise any health or nutrition claim they desired, rather than the limited list permitted by the EU. Their flexibility and creativity may still be inhibited by regulators such as the ASA, who may just look to the EU approved list for guidance as to what is and what is not misleading and enforce accordingly, but there is opportunity.
DWF Future of Food Manufacturing Report
We spoke to over 100 C-Suite executives at leading Food Manufacturers in the UK to find out about the key areas of growth alongside some of the key challenges facing the industry in a period of unprecedented technological and cultural change.
The report combines DWF's legal expertise with insights from some of the UK's top food manufacturers. Essential reading for everyone involved in delivering growth in food.