Article 50: industry experts weigh in on packaging prospects post-Brexit
Article 50 is in the process of being triggered by the UK Government. While no one can be certain what this will mean for business, experts at Pro2Pac last month tried to make sense of how the UK packaging industry will deal with the changing economic and political environment. Elliot Gardner reports.
With the confirmation today that the UK Government has submitted its formal Article 50 notification of the intent to leave the EU, the topics discussed at the Pro2Pac seminar ‘How Will the Packaging Industry Fare Post-Brexit’ are more relevant than ever.
Pro2Pac took place alongside the International Food Event (IFE) on 20-22 March, with experts from across the packaging industry demonstrating their latest goods and getting to grips with changes within the market. There was a consistent undertone throughout the event though, as industry experts know that food, drinks and packaging are all set to be heavily impacted by the UK’s exit from the European Union, and with Article 50 set to be triggered so soon after the event, it’s fair to say tensions were higher than usual.
Packaging News editor Phillip Chadwick was chair for the proceedings.
Phillip Chadwick: How has the vote affected your members and the companies you work with?
Packaging Federation chief executive Dick Searle: Well the immediate impact was the obvious one. We're an industry that imports almost all of its raw materials. Almost all of those are either euro or dollar denominated. The issue I think for our industry, and indeed for our customers, is how much of those price increases are going to be passed through now, and how many will happen going forward.
One thing is absolutely sure, and that's food, drink and a lot of other things are going to increase substantially in price over the next 12-18 months, and if anyone complains then my answer is very simple - that's what you voted for.
Confederation of Paper Industries director of packaging affairs Andy Barnetson: In the case of corrugated boxes there's perhaps more than an average level of UK-sourced material because we recycle paper in this country through big recycling mills. So boxes are often made of recycled fibre that's been sourced nationally, so we might not see corrugated quite as affected, but the underlying problem is still there.
There’s currency exchange and the threat of having to bring goods across the channel. If it isn't tariff barriers then it could be non-tariff barriers, and if something comes across the channel then will it get through customs as it leaves the EU? Or enters the EU? The big problem in all this is uncertainty. Industry does not like uncertainty.
We don't know what’s happening. Some of the statements from the Prime Minister have been useful, but until there's more certainty, we're still really up in the air, and that's what we don't want.
Sixbutterflies founder Inder Poonaji: I've done some research in this area, and what was really interesting was when I went to the Institute of Directors and had a look at their confidence reports on Brexit. This is an incredible figure: 'Do you think the result of the referendum will be positive or negative for your primary organisation?' - The answer was 64% negative. And this is from business leaders. And then 'Do you see Brexit as a threat or opportunity?' - 50% said a threat.
Business runs on confidence and it runs on consistency, I think with the confidence factor, we'll learn in a few months where we are with it but the issue is going to be that business leaders are feeling so uncertain. It’s going to be quite a challenge in the next two years, with where Britain - if it is still Britain at that point and not England - find themselves.
INCPEN chief executive designate Paul Vanston: We've gone beyond leave and remain and leavers and remainers. Those two groups are now defining their issues in a different way. All of your customers are going to be putting their feet in different camps, and will become much more polarised - and who has the data on all that in terms of helping your customers? It’s become very difficult in current times to try and understand what our customers want.
Prices though, which Dick has already mentioned, seem inevitably to be affected negatively, certainly in terms of our areas of work, and none of those price rises are likely to be seen by any of demographic as welcome.
PC: What are we talking about in terms of areas specific to the packaging industry? Particularly directives, packaging waste directives, for example?
DS: I think that’s the wrong question. I think issues about targets and so forth are frankly pretty peripheral. One of the questions that has been asked of me a few times is 'what is the impact of Brexit on the packaging industry?' and my answer is that it’s the wrong question. It should be ‘what is the impact on our customers?’ The packaging industry is a service industry; we don't decide how much packaging gets sold, it depends how many products our customers sell. We don't even decide what kind of packaging gets used, our customers make those choices.
The fact of the matter is there are massive issues out there with our customer base, and we are supporting them in areas like industrial strategy. The government produced a green paper on industrial strategy. The food and drink industry is the biggest manufacturing industry by far. Combined with [packaging's] employment of 85,000, we're 20% of the UK manufactory. Food was mentioned in the 155-page green paper twice - it’s an absolute farce. The real issue for our supply chain is how the hell we're going to get through some of these minefields.
IP: I think the EU has been quite successful in actually driving a lot of good environmental policies. The UK was known as the dirty man of Europe, and it was fixed only because of strong EU regulations and enforcement of that.
The UK will have to think - will it be the green and pleasant land that we want to go forward with, or will it be an industrialised 'anything goes as long as we have trade with anyone'. It’s going to be quite interesting what direction we take it in, and what brand the UK wants to be after Brexit. I think if Britain doesn’t have a clear purpose in mind then we're going to go wrong.
PV: At the minute we at least know what the playing field looks like because of regulations and directives, and we know how things are standardised across the industry because of the negotiations that our industry has taken part in across the last 30-40 years, so we've got to be really careful about how many babies we're throwing out with the bathwater here.
Up until 29 March we've been pre-Brexit, then from two years hence that’s mid-Brexit, and then we'll have post-Brexit after that. This debate is about post-Brexit and I have no idea in two years time how that’s going to look. The amount of Government time and legislation that will be needed over the next two-year period and beyond will very likely push almost everything else to one side.
DS: However much we like to think that we're an important industry, and God knows we are - we're a fundamental part of the national infrastructure - nobody talks about us, because officially we're not an industry, there’s no standard industrial classification code for packaging as a whole, its split over about 12 different activities.
But the supply chain couldn’t work without what we do, and vice-versa, so therefore I think that it’s absolutely essential that we lobby cooperatively. Food and drinks are about 70% of what the packaging industry does, but are we being heard? I think it’s an awfully good question. I think a lot of politians are wandering round in a daze at the minute quite frankly. I smile when I heard the suggestion that it would take two years for Brexit, I think it'll take nearer 20 when it comes down to it to get it all sorted, there's 21,000 different rules, regulations and laws to be rewritten. But are we being heard? I think time alone will tell.