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Nick Gillett: How red tape is paralysing the industry

Published:  20 September, 2022

In the second of our new critical mini-series, Mangrove UK’s MD calls for a serious untangling of post-Brexit red tape.

What a rigmarole – increasing complexity and frustration for small businesses, deterring quality international products from joining the market, driving costs up for consumers and ultimately limiting diversity. Common sense sometimes goes out the window; red tape is paralysing the industry.

The drinks industry has always been highly regulated, and rightly so. But in post-Brexit Britain, the regulations being imposed on producers and distributors are in danger of spiralling out of control, with a far higher focus on points of entry like ports where paperwork now needs to be completed – a nightmare for most distributors to manage, adding time and resource to the process and driving up costs at every stage. And for those who can’t afford specialist help, it’s a business risk because the paperwork must be correct.

Most of us have the best intentions. We want to pay the proper duty, create a level playing field and for doing this, we bear significant costs, which are then passed on to the consumer – a consumer that ultimately ends up with less choice because this burden of regulations sees many smaller producers out of the market.

Instead of laborious and restrictive regulations and costs, could we not instead put resources into policing those who break the rules and evade regulations? Or would that be too sensible? Instead, we’ve ended up with a regulatory environment that doesn’t embrace difference. And worse, it means some exporters won’t even entertain coming into the UK. Again, this lack of choice and regulation affects the consumer that doesn’t get the rich world-choice on the shelves.

As an importer and distributor operating in this highly tax-regulated environment, we have first-hand experience with the tracking, traceability, rules, and regulations at every stage. Every time there’s a form to be filled in, a report to be completed (even if it’s electronic), it requires a trained member of staff to do it. It takes human time, which costs money. Money that’s ultimately passed back to the consumer via the shelf price.

As an example, let’s take duty stamps. We used to have free trade across the EU. Then we came up with a duty system designed to stop smuggling. Even before it launched, there were counterfeit stamps on the market. And although there’s some effect, I would question whether duty stamps have achieved what they set out to. They certainly haven’t stopped the criminal element. Setting up red tape is all very well but isn’t it rendered useless if you then don’t police it?

More hurdles to jump await anyone wanting specific accreditations for their liquid. If we want to do other good stuff, like supporting fair trade or promoting planet-friendly practices such as organic certification, we’ll soon discover a total lack of consistency in global standards. You can't rely on outside certification if you want your product to be stamped in the UK as fairtrade or organic. You have to be recertified in this country, and – surprise, it’s very expensive to do that. And off-putting for brands. And – you guessed it – ultimately, this all needs to be paid for by the consumer.

So, I’ve got the many flaws I’ve spotted off my chest – do I have solutions? Well, a few that have come to mind.

As said, the food and drink industry rightly operates within a strict regime, but we already undergo inspections. Couldn’t inspections support a reporting-by-exception protocol rather than wholescale movement of paper (and we are talking actual paper, which doesn’t help the environment)? In our technologically advanced world, there are a million solutions. Traceability of goods in a supply chain should be straightforward, more efficient, and less prohibitive for smaller businesses.

The bigger players, such as Tesco, Waitrose, and the discounters, are good at supporting smaller producers and have codes of conduct for treating suppliers, as part of their Corporate Social Responsibility. But this largely came in during the pandemic. The inexcusable fact is that this conduct should be the norm because some of the ways in which big companies run their businesses: delaying settlement of invoices, for example, is shameful and disables the productivity of smaller producers.

No one really wants to stick their head out and complain against the giant warehouse retailers. But the onus shouldn’t be on us to get it right, and even then, risk not getting paid. In a country where we regulate beyond sense, why are there still no penalties for big businesses who conduct their business in such a way? And what would be wrong with a global system for fairtrade for example? We all understand the principles.

We need to think pan-European and globally for a start. The US changed its bottle size away from 750ml to 700ml, so the rest of us wouldn’t have to produce specialist glass. A great example of big-picture thinking that simultaneously made it easier for producers and distributors to move stock to different markets.

The UK is a small, expensive, but desirable shop window – a must-have – and yet we deter brands from entering. Currently, the red tape is strangling the life from us, not to mention profitability. By assuming the worst and hyper-focusing on the criminal element, the system has lost its way. And in turn, the system then neglects more positive moves, such as incentivisation for those who want do the right thing.

Can we not focus on investment, change, and stop the rhetoric that constantly tells us we have the freedom to do what we want, when all we actually have is reactionary policy against the pandemic and cost-of-living crisis.

We, as businesses, need a different environment to facilitate success and this will only come off the back of a much larger conversation. I say – let’s have it!