Food & drink

1 July, 2016
by: Cripps Pemberton Greenish

The current situation:

At present, food and drink businesses in the UK must comply with EU law. They are free to trade goods across the EU without tariffs and to employ staff from across the EU. In this sector, a particularly high proportion of legislation (estimated in excess of 80%) originates from the EU, including that in respect of food safety and provenance, labelling, product quality, commercial agency protection and employment rights.

Many food and drink businesses import and export goods within the EU, make use of EU workers and rely on cross-border supply chains, either directly or indirectly. Many farmers rely on EU subsidised funding under the EU Common Agricultural policy and certain food and drink products have geographic protection under EU law. Clearly, much of the UK food and drink sector is currently integrated with the EU.

 

What might change?

The terms of the UK’s withdrawal under Article 50 of the Lisbon Treaty will govern changes to the law that affect the food and drink sector. It is not possible to predict exactly what will change, and changes will evolve continuously over a minimum two year period.

Any EU Regulations that are directly applicable in the UK, i.e. that do not need separate UK legislation, will need to be incorporated by way of new or amended statutes which can take years to draft and negotiate. Statutory amendments will filter down into new practical implications for businesses, but not immediately.

Elements of food law that are already fully integrated into UK law, such as consumer rights and food labelling law, may be impacted less and change more gradually.

Some key predictions current in the food and drink media include:

  • sales of discretionary food and drink products, such as confectionary, may fluctuate more quickly than staple produce
  • farmers and grower producers who have previously used European labour may need to appeal to local or more global workers
  • farming subsidies from Brussels would need to be addressed and replaced through local government
  • geographic protection of food stuffs would need to be renegotiated to offer protection against counterfeiting or intellectual property (IP) infringement
  • import VAT or customs duty may increase or change for importers/exporters
  • supply contracts and other commercial contracts may be disputed or disrupted. Parties might try and argue (albeit tenuously) that Brexit constitutes a ‘force majeure’ that is capable to rendering agreements void.

 

What impact could this have on UK businesses?

Initially there will, inevitably, be a period of uncertainty, during which companies may slow down investment and expansion; the savvy will use this as an opportunity to develop contingency plans and assess the strengths and weaknesses of their business.

The pound sterling has currently dropped which may make UK goods, including food and drink products, more attractive to global markets, including the US. This may in turn facilitate long term import and export with a more global audience.

 

What you need to be thinking about now:

Companies in the food and drink sector need to work out what elements of their own businesses are likely to be impacted, stay abreast of political developments and changes to the law and make plans for all eventualities, gradually refining their strategy as the changes crystallise into law.

Regular reviews should be undertaken of current supply chains, commercial contracts, IP rights, employment contracts and one eye should be kept keenly on developments with competitors. In short, a pro-active approach is essential to minimise business risk and uncertainty; taking pro-active professional advice can assist in this respect.

Rather than a threat, change may present opportunities for growth, business development and expansion for UK companies while facilitating greater control and technological development within the industry.