As a controversial no-deal Brexit moves closer to reality, Thomas Parker finds out from packaging industry leaders what impact it could have after 29 March
A no-deal Brexit would have a profound impact on businesses across the UK – with the packaging industry in particular braced for huge changes.
Theresa May’s Brexit deal will be put to the UK parliament tonight (15 January), but almost every political expert believes it will be voted down.
Should that happen, it could pave the way for Britain to leave the EU on 29 March without any deal, throwing up a complex set of questions about how companies will be affected.
We speak to packaging industry leaders about the main changes this could create, ranging from the impact on just-in-time supply chains to the effect it will have on labelling regulations in the UK.
What effect will a no-deal Brexit have on just-in-time supply chains on packaging industry?
One of the biggest discussions surrounding a no-deal Brexit is the effect that it will have on so-called just-in-time supply chains.
Just-in-time (JIT) production – also known as the “Toyota production system” after being dreamed up by the Japanese engineering giant – is an end-to-end manufacturing technique that aims to cut costs by reducing the amount of goods and materials a firm holds in stock at any one time.
And with the manufacturing industry relying heavily on products from overseas, such as car parts, JIT is a vital cog in the supply chain.
Tony Mundin, managing director of Nottingham luxury packaging firm Oyster Retail Packaging, has “a number of worries” when it comes to the event of a no-deal Brexit, particularly relating to imports and exports.
He says: “We’d be expecting longer lead times due to import delay, which would increase costs.
“The weakening of the pound offers an increase in costs for everyone including ourselves.
“Put simply – in the event of a no-deal Brexit, we’ll be facing a multitude of side effects that can only result in a negative outcome, a loss of trust, and a lack of confidence for our future.”
No-deal Brexit impact on food services packaging
Major UK retailers such as Aldi and Tesco reportedly use JIT in the supply chain to minimise stock retention, improve working capital and reduce wastage.
In a government report conducted by Helen Munday, chief scientific officer for the UK’s Food and Drink Federation, 70% of all food imported into the UK comes from the EU, with the UK being only 60% self-sufficient in food.
The report also states: “JIT supply chains mean empty shelves in four days or fewer if supply is delayed or interrupted.”
Martin Kersh, executive director of the Foodservice Packaging Association, tells Compelo Packaging that the food services sector relies on regular deliveries of goods into stores – sometimes daily.
Given that packaged goods are often bulky, it can be difficult for businesses to store them on site.
Mr Kersh says if certain materials used to make the packaging for food products don’t arrive in time, there could be a risk of running out of the food on the shelves.
No-deal Brexit impact on pharmaceutical packaging
In 2016, the UK exported £24.9bn of pharmaceutical products, of which £11.9bn went to the EU, according to the UK government.
At the same time, the UK imported £24.8bn of pharmaceutical products, of which £18.2bn were from the EU, giving a trade deficit of £6.3bn in the EU.
The Association of the British Pharmaceutical Industry says this reflects “45 million packs of medicines that leave the UK every month and go to Europe, and 37 million packs of medicines that leave the continent and come to the UK”.
Hull-based pharmaceutical packaging company Origin’s head of marketing Rich Quelch says: “Brexit will inevitably add costs result in damaging border delays.
“This will cause serious problems for time-sensitive medicines, which require delivery in as little as 24 hours in many cases, potentially leaving patients without vital medication.”
He says human medication marketing would no longer be centralised by the EU but instead by the UK’s overseen by the Medicines and Healthcare Products Regulatory Agency (MRHA) in the event of a no-deal Brexit.
“It would require new laws and systems for packaging and labelling to ensure high standards and safety, putting stress on regulatory bodies to ensure they’re prepared,” he says.
“The MRHA approval process is largely industry-funded and would struggle to sustain itself on only the fees paid for the review of medicine in the UK.
“But it would provide a platform for the MHRA to establish itself as a global leader in medicine regulation, including marketing authorisation and packaging.”
No-deal Brexit impact on labelling
When the UK leaves on 29 March, EU-based provisions will all be rolled over and continue in Britain as part of the Withdrawal Act.
There are some standards in the UK that aren’t a part of EU rules already, such as national-specific rules on products containing meat and the composition of bread and flour. These will also remain unchanged.
However, there will be a few changes in the wording of labels.
For example, honey blends currently bear labels stating that ingredients are sourced from both the EU and outside.
If the UK leaves the union without a deal, this must be altered to wording such as “blends of honeys from more than one country”, the government says.
In April 2020, the EU will change its rules in regards to the origin of primary food products. The UK government may also choose to adopt these regulations.
Something else that will be affected is the addresses used on labels.
An EU address currently on labels in the UK would no longer be valid for a UK market, meaning any products sold in the UK that currently have an EU base would then need to have a UK-based address for that product.
Any UK-based company selling products in the EU must, in turn, have an EU address instead of using the UK address.
Speaking at industry event Food Matters Live last November, packaging firm Sun Branding Solutions’ head of regulatory Phil Dalton said Brexit could offer an opportunity for better labelling legislation.
He said: “If your hands are tied behind your back by the EU, it’s almost impossible to make significant changes.”
But he added: “There probably aren’t going to be any immediate changes – we’re probably looking at a few years before we get to a point where we can focus on what we want to do – but it does give us an opportunity to do research.”
But Katie Merten-Lentz, EU law and expert at international research firm Keller and Heckman, believes the UK will be best served in keeping its own labelling up to date with EU standards.
In an interview with industry website Food Manufacture, she said: “To keep a fluent exchange of goods, the UK cannot drastically change labelling.
“The UK will have to follow the European lines without being part of the decision-making process.”