Brexit could cost UK retailers millions in compliance
Trace One, a label management (PLM) software company has warned that UK food retailers and manufacturers will have to plan for potential regulatory upheaval in the event of a Leave vote in the EU referendum.
With the bulk of legislation on subjects such as food safety and labelling set at the EU level, the decision to exit could mean the majority of related UK law having to be revisited and even re-written. For retailers who may have invested up to £30 million as recently as 2014 to comply with the EU’s ongoing Food Information Regulation (FIR), these changes could end up adding further costs on top of an already significant burden.
“FIR is a perfect example of how the referendum could force additional costs onto retailers,” said Shaun Bossons at Trace One. “With allergen information required on product labels from December 2014, and nutritional information required from December 2016, the vast majority of retailers will have already made the relevant changes to packaging, with costs typically running to £3,000 per product.
“Yet if Brexit wins the day on June 23rd, there is no way of knowing if and when UK-only regulations will be introduced, necessitating further changes to packaging and effectively wasting the previous investment in FIR compliance. With the typical large retailer having over 10,000 product lines, the costs of adapting products for any new regulation could once again run into the tens of millions.”
If food products sold in the UK no longer need to conform to European legislation about specific allergenic ingredients on packaging, there may be a decision to highlight more allergens or ingredients, or possibly fewer; again incurring significant costs. The UK may implement specific legislation about traffic light labelling, something the EU has chosen recently not to do despite it being commonplace here.
Similarly, possible changes to trade tariffs could make certain ingredients or products too expensive to use, demanding either a change to product and pricing strategy or a change of recipe; neither of which will be low-cost.
These changes will be particularly sensitive for retailers who operate in multiple geographies throughout Europe, or who have partnerships with a number of European suppliers. It may be that these retailers will need to review their business strategy and relationships in light of this.
“While any changes from the vote are unlikely to be immediate, retailers still need to be ready,” continued Shaun Bossons. “A large retailer needs time to prepare changes and change course, especially over a large range of products. The fact is, a Leave vote will have ongoing repercussions, where retailers might have to pay multiple times to alter products in response to regulation changes. Being as adaptable as possible will be critical in coping in this environment.
“If changes do have to be made to products or processes, the more quickly and simply they can be completed, the lower the cost and disruption retailers face. A culture of collaboration between retailers and their manufacturing partners will be an essential part of this; even if the worst never happens, improved processes will still benefit the business.”