With the referendum on the UK’s continuing membership of the European Union looming, the UK food industry is debating what a ‘Brexited’ Britain outside the EU would mean for wholesalers and suppliers. Andrew Burnyeat discovers why many will be voting to remain in the union

Wholesalers and their suppliers are overwhelmingly in favour of the UK remaining within the European Union, despite frustrations over issues including corruption and red tape in the Brussels’ bureaucracy.

As the June 23 ‘in-out’ referendum on the EU approaches, minds have been focusing on how the main areas of cost, labour mobility and common regulation might affect the overall wholesale picture – as well as supply segments including food, drinks and tobacco.

The Food & Drink Federation (FDF) came out against a ‘Brexit’ on March 15, when it released details of a membership survey: 71% of the members that responded (half of its 300-member companies) wanted the UK to remain in the EU; 12% backed Brexit, while 17% were undecided.

brexit imageLike many, the FDF’s director general, Ian Wright, believes there is a need for continued reform of the EU, in particular a reduction in the bureaucracy generated by regulation, but he doesn’t advocate a complete withdrawal.

“Above every other consideration, it is the single market, access to raw materials and the free movement of labour that are the important issues,” he says.

Such issues are also of concern to Steve Parfett, chairman of wholesaler AG Parfett & Sons, which operates across the North of England.

He said: “My main concern about a Brexit is that the uncertainty it would cause would damage prosperity. I am also not convinced that we are able, as a country, to negotiate better deals or do trade deals.”

He is also concerned a Brexited Britain could end up having to abide by the same rules as EU member states to gain trade access, but would not “have a say” on the rules in EU institutions.

His views were reflected in several recent and very detailed reports written by legal experts on the Brexit issue. The UK and the EU: Benefits, Misconceptions and Alternatives, which was issued by the group Lawyers – In for Britain (LIFB), says that at least 50 EU trade agreements with other countries would need renegotiation following a Brexit.

LIFB spokesman Martin Coleman says: “Thousands upon thousands of new UK rules and regulations will be needed if the UK leaves. Far from offering a reduction in rules, the UK will be engaged in a ‘regulation-fest’, needing a swollen Whitehall and an expansion in government lawyers, advisers and bureaucrats.”

The report warns that food would be the worst casualty of a Brexit, estimating 15% food tariffs could be imposed on EU-sourced food, pushing up the wholesale price – by value, more than two-thirds of food imports come from other EU states, currently entering the UK duty-free.

Another report, Brexit Analysis Bulletin – Food & Drink, authored by lawyers Shepherd and Wedderburn, says: ‘The biggest impact and greatest fear for food business operators is what form of free trade would be possible outwith the EU.’

brexit-statThe report suggests that the UK could avoid tariff barriers by joining the European Economic Area (EEA), a halfway-house EU membership used by Norway and Iceland, which would see a significant amount of EU legislation still applying in Britain.

But agricultural goods are not covered by the EEA and tariffs might be imposed anyway.

The lawyers reported that UK food business operators are ‘almost unanimous in their view that tariff barriers would be damaging to their business, and that while trade deals are negotiated, UK suppliers would face major competitive disadvantage’.

In addition, EU rules promote consumer confidence in what they eat, the LIFB report notes. The EU’s food standards framework, Regulation (EC) No 178/2002, outlined a food law framework and set up the European Food Safety Authority (EFSA).

The report also points out that co-operation between member states has cut tobacco smuggling. It cites Operation Forecourt, led by EU police agency Euro­pol, which has saved the UK taxpayer around €277,000.

James Dunworth, director of ECigaretteDirect, is a strong critic of the EU, but is reluctant to promote Brexit because of the free trade advantages.

He says: “EU regulations have been quite restrictive in terms of the pace of innovation. For example, the maximum cap on nicotine is bad for people who need a high nicotine intake. But even if there is a Brexit, this regulation will still be in force.”

That said, he argues the need to rewrite EU-based legislation in the UK, as “a lot of EU directives are already enshrined in UK statutes”. Of course, outside the EU, the UK would be free to repeal EU rules as Parliament sees fit, including those restricting e-cigarettes.

He adds: “The UK has a more progressive attitude towards e-cigs than does the [institutions of the] EU.”

A survey conducted in 2014 among 1,600 ‘vapers’ (e-cig consumers) – which may be updated soon by ECigaretteDirect and its partners – showed an overwhelming anti-EU bias because of the restrictions, says Dunworth.

He adds: “This is something they feel very strongly about, as being able to give up smoking is a major personal health issue.”

While he says the EU is a “corrupt, inefficient bureaucracy” and sometimes a “massive farce”, Dunworth says he feels “torn” on the issue of quitting the union.

“The positives of free trade are there, and we have seen MEPs change their minds when they receive large numbers of letters from vapers. If we left, we’d have no power to change the EU, just like Norway doesn’t.”

Major drinks supplier the Scotch Whisky Association (SWA) is much less torn on the issue. It has submitted evidence collected from its members to Parliament on the subject that firmly opposes a Brexit.

SWA head of external affairs Graeme Littlejohn warned that should a Britain outside the EU vary bottle sizes from those mandated in the rest of the EU, costs could rise for British wholesalers buying whisky.

“The regulations that govern bottle size and labelling in the UK are EU rules. The message from our members could not be clearer – they want common rules in different markets. They don’t want brands to look different in different countries.

“If you’re looking at bulk product then it’s important that the rules are the same across the markets.”

Regarding transport, Marion Romaines, spokesperson for the hauliers group The Transport Association, says that after a Brexit, “road user charges in the EU will continue and the UK will have to pay as normal, just as any truck would continue to pay our road user charges.”

A weaker pound following a Brexit could increase the costs of raw materials, while the impact of a Brexit on the free movement of labour would be a huge concern for UK wholesalers and others, according to the Shepherd and Wedderburn report.

A survey from the Wine and Spirit Trade Association of 300 of its members shows that roughly 90% want to remain in the EU.

Many of the leading wholesale companies and trade associations contacted by Better Wholesaling are still playing their cards close to their chests over Brexit. But one industry figure complained that a “lack of debate” could be damaging.

Michael Bell, executive director of the Northern Ireland Food & Drink Association (NIFDA), says he is “very concerned that if we don’t have a proper debate, we could face consequences”.

He describes an industry that has bright prospects, following 10 years of prosperity. But he warns that: “A Brexit is the biggest cloud on the horizon.”

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