Westminster Watch: What the party manifestos mean for consumer goods, food and retail

With the UK General Election on Thursday 4 July, it is in the interests of all clients to understand each party’s manifesto promises and the impact they could have on their businesses.

The Financial Times’ aggregation of national voting polls suggests the Labour Party maintains a 20 percentage point lead on the Conservatives (FT, 25 June 2024). No incumbent party has ever bounced back to close such a significant polling gap so far into the campaign season. As such, it seems likely that the Labour Party will achieve an electoral majority on 4 July (although there are a wide range of predictions as to how significant this majority will be). While there is always a possibility that unexpected developments may change the trajectory of the campaign, as of today, we advise clients to carefully consider the policy commitments that are being proposed by the Labour Party in their manifesto.

This is the fourth in our series of Westminster Watch client alerts, analysing the impact of the party manifestos on key sectors across the UK economy – including technology, financial services and energy. In this article our UK Government Affairs team offer an overview of the manifesto commitments affecting consumer goods, food and retail businesses in the UK. We’ve focused on the two major political parties, with additional insight into the manifestos of the Liberal Democrats and Reform UK to give a sense of the parameters of the debate.

This Westminster Watch has been written with Partner Chloe Forster, UK Sector co-lead for Consumer Goods, Food and Retail. Chloe’s clients in the CGFR sector include food and beverage manufacturers, high street and online retailers, pharmaceutical companies, global consumer goods brands and major hospitality firms.

 

THE LABOUR PARTY MANIFESTO

The Labour Party’s manifesto aims to unlock economic growth, supporting businesses operating in the UK. While polls suggest a political change will be set in motion on 4 July, this is unlikely to translate into a dramatic change to the business conditions that companies in the UK operate in, at least in the short term. The Labour Party has committed to ensuring a stable policy environment and strengthening regulatory and economic institutions. The manifesto lays out a long term, strategic approach, planning to align the many mechanisms of government towards an over-arching Industrial Strategy (The Labour Party, 13 June 2024).

Labour will not increase corporation tax, capping it at the current 25%, and will publish a roadmap for business taxation throughout the next parliament before making any additional changes. They will retain a permanent full expensing system and the small business annual investment allowance.

The Labour Party does commit to substantial reform of business rates. Labour have promised to replace business rates with a new system to “level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship”. This will be welcome news to high street retailers, particularly smaller, independent businesses, although it does not acknowledge the fact that most retailers of any size sell to customers through multiple channels of distribution. In order to keep the UK’s marketplaces globally competitive, the next government may need to recognise the full range of ways in which customers shop for consumer goods in the 2020s – both online and in-store.

As of now, publicly available details of the proposed business rates replacement are limited. It is likely that the Labour Party, if successful in the upcoming election, will carry out an extensive review and consultation process before introducing legislation on the topic. As such, there is an opportunity for clients to engage with a Labour government in order to participate constructively in the reforms and minimise the commercial consequences of this policy on their business.

The manifesto also committed to reform of Britain’s “outdated employment laws”. Labour will scrap the National Minimum Wage age band that sets a lower legal threshold for hourly pay to adults aged between 18 and 20. They will make broader structural reforms, too, expanding the remit of the Low Pay Commission to account for the cost of living in its advice to government. Zero-hours contracts deemed “exploitative” will be banned, as will practices of “fire and rehire”. Employees will have rights from day one to sick pay, parental leave and protection from unfair dismissal. Increased regulations inevitably have an impact on business costs, and consumer goods, food and retail firms may find their spending on labour increasing as a result. If the Labour government wins the election, businesses may want to proactively engage with it on these issues.

Businesses will welcome Labour’s ambitions to increase the flexibility of the Apprenticeships Levy by introducing an updated Growth and Skills Levy. This new system would allow businesses to use up to half of their total levy contributions on non-apprenticeship training for their workforce, reserving the other 50% for apprenticeships (Labour, May 2023). The reforms look set to make training more accessible to all members of a company’s workforce and enable businesses to tailor their spending to programmes that will have the most impact.

On trade, Labour’s manifesto commits to improving the UK’s relationship with the EU, negotiating a veterinary agreement to reduce border checks and manage food prices. Before the election was called, the Windsor Framework deal of February 2023 set out plans to require all meat, fish, dairy, fruit, vegetables and composite products in the UK to be labelled “Not for EU”. However, the Marking of Retail Goods Regulations was not introduced as legislation in parliament before its dissolution last month. A likely change of government on 4 July introduces uncertainty for businesses – over the eventual form of these labelling requirements, as well as any potential changes to the implementation of a new border regime for sanitary and phyto-sanitary goods over the course of this year (physical checks were introduced in April and security declaration requirements are set for October 2024). Labour’s manifesto, while expressing welcome intentions of increased regulatory alignment with the UK’s trade partners, does not provide enough detail to assuage these uncertainties.

For some food and consumer goods businesses, a new Labour government would see the introduction of commercially significant legislation:

• The Labour Party would ban the advertising of food and drink high in fats, salt and sugar (HFFS) to children. This would uphold a policy that the Conservatives originally planned to implement in April 2022 – preventing businesses advertising before the 9pm watershed.
• Similarly, the manifesto promises to reintroduce a version of the Tobacco and Vapes Bill, to ban vape companies from advertising before 9pm, or branding themselves in a way appealing to children and “ensure the next generation can never legally buy cigarettes.”
• Selling high-caffeine energy drinks to anyone under 16 years of age would be outlawed under new rules.

Labour’s commitments to improving public health are part of a wider policy focus on the national health service, but there is a risk that these policies could lead to significant commercial ramifications for the businesses concerned. Whilst many businesses have already done a significant amount of planning in relation to previously proposed legislation, it will prove particularly challenging if legislation is altered.

Many firms in the consumer goods, food and retails sectors are increasingly turning to third-party suppliers of AI technologies to unlock efficiencies across their business model, and we anticipate that this investment will increase now that inflation has returned to much lower levels. This area of rapidly developing innovation will require an equally dynamic and coordinated legislative framework to regulate the industry without stifling new advancements. We would encourage CGFR clients using AI technology such as chatbots, recruitment sifting tools and personal shoppers to take a look at our review of the impact of the manifestos on the technology sector.

 

THE CONSERVATIVE MANIFESTO

The Conservative manifesto emphasises its pro-business credentials, promising GBP17 billion a year in tax cuts. This would include taking another 2p off employee National Insurance, as part of an “ambition to end the double tax on work,” when fiscal conditions allow (Conservatives, June 2024). The manifesto also commits to freezing income tax and VAT over the next term of parliament.

On business rates, the Conservative manifesto commits to rebalancing the disproportionate burden placed on high street, leisure and hospitality businesses by “increasing the multiplier on distribution warehouses that support online shopping over time.” Helen Dickinson, CEO of the British Retail Consortium, has questioned whether this offers a “viable solution”, given the number of businesses that “sell goods online as well as from stores” (BRC, June 2024).

The Conservatives are keen to create more freeports and Business Rates Retention zones, which would assign a proportion of business rates revenues from a zone to councils to fund new infrastructure in the area. It remains to be seen how many of these new zones would be created, how many businesses would benefit, and the timescales involved.

For small businesses, the Conservatives would retain key tax incentives including the Enterprise Investment Scheme, Venture Capital Trusts and Business Asset Disposal Relief. The manifesto also states the Conservative Party’s intention to relieve more companies of “burdensome reporting requirements” by lifting the employee threshold that determines whether a business is considered medium-sized.

The Conservative manifesto promises a continuation of existing employment and skills policies to support a “flexible and dynamic labour market”. The National Living Wage would be maintained at two-thirds of median earnings, rising to GBP13 an hour. The Conservatives also point to their delivery of over 5.8 million apprenticeships since 2010 and commit to funding 100,000 more each year over the next parliament.

In common with the Labour Party manifesto, the Conservatives do not set out a detailed policy on trade. But their broad position on international trade is to continue to focus on free trade agreements, while steering away from closer alignment with the EU. The Conservatives would not agree to any adjustments of the EU Trade and Cooperation Agreement that would “infringe legal sovereignty or involve submission to the Court of Justice of the European Union or dynamic alignment.” The manifesto makes clear that all imported food and drink products, including those from countries that the UK has trade agreements with, would have to comply with the UK’s high standards. When it comes to negotiating further free trade agreements, businesses will be most concerned with how a Conservative government would define “the UK’s high standards” – details of which are not included in their manifesto.

The manifesto proposes several new policies when it comes to the food sector. Key initiatives include:

• A renewed commitment to restricting the advertising of foods deemed unhealthy until after the 9pm watershed.
• A promise to “gather new evidence on the impact of ultra-processed food”, a reference to the work of the House of Lords’ Food, Diet and Obesity committee prior to the dissolution of Parliament.
• The aim to improve public sector procurement so that 50% of food spending purchases food produced locally or to higher standards.

Overall, the Conservative manifesto offers a business-as-usual approach. Many of the manifesto’s policies lean towards a continuation of the status quo, re-committing to existing government announcements. It should be noted that the commitments that do represent additional spending have been described as paid for by “uncertain” and “unspecific” savings, according to Paul Johnson, Director of the Institute for Fiscal Studies (IFS, June 2024).

 

THE LIBERAL DEMOCRAT MANIFESTO

The Liberal Democrat’s manifesto echoes the Labour Party in pledging significant reform of business rates. They would replace rates with a “commercial landowner levy” taxing landlords according to the value of the land occupied by tenants.

The manifesto promises to “unlock British businesses’ global potential, bringing down trade barriers.”

The Liberal Democrats would increase the responsibilities of large businesses in the consumer goods and retail sectors. Measures to increase the environmental and social responsibilities of companies would include:

• Introducing a general duty of care for the environment and human rights in business operations and supply chains.
• Requiring all large companies listed on UK stock exchanges to set targets consistent with achieving the net zero goal, and to report on their progress.
• Promoting employee ownership by giving staff in listed companies with 250+ employees the right to request shares, to be held in trust for the benefit of employees.
• Establishing an independent review to recommend a “genuine living wage” across every sector.

The UK’s largest groceries retailers may wish for further details on the Liberal Democrats’ plans to “strengthen the Groceries Code Adjudicator to protect consumers from unfair price rises and support producers.” On food policy more widely, the Liberal Democrats also have ambitions to:

• Negotiate comprehensive veterinary and plant health agreements with the EU to achieve a minimal need for checks.
• Ban bottom trawling in marine protected areas to ensure that “sustainability lies at the heart of fisheries policy”.
• Match the EU’s stricter rules on preventative use of antibiotics and introduce a comprehensive plan to tackle antimicrobial resistance in farm animals.

The Liberal Democrats’ ambitions to move toward greater alignment with the EU will be welcome news for many businesses. Unlike the Labour Party or the Conservatives, their manifesto explicitly states their aim to “place the UK-EU relationship on a more formal and stable footing by seeking to join the Single Market”.

 

THE REFORM UK MANIFESTO

The Reform UK manifesto – titled “Our Contract with You” – sets out a very different political vision, aiming to unlock the possibilities of Britain’s exit from the EU.

Reform UK is averaging 16% in the polls, looking to establish a small cohort of MPs in the next parliament (FT, 1 July 2024). They are unlikely to have a significant voice in the House of Commons, as consistent levels of minority support across many constituencies are not conducive to electing MPs under Britain’s First-past-the-post voting system. However, polls suggest their policies have been gaining traction with disillusioned Conservative voters, a trend that may well continue over the next five years and beyond.

Reform UK’s manifesto pledges GBP88 billion in tax cuts (Reform UK, 17 June 2024). The threshold at which businesses would have to register for VAT would increase from GBP90,000 to GBP150,000, with a policy to exempt the first GBP100,000 of profits from corporation tax. Much of the tax reductions promised would be paid for by slashing government subsidies, including for net zero.

Instead of enforcing increases to the NMW or NLW, Reform UK would raise the income tax starting threshold to GBP20,000 to save the lowest paid GBP1,500 per year. This would be welcome news to large retail, consumer goods or food companies. However, strict controls on immigration – including raising the National Insurance rate to 20% for foreign workers – may have the effect of contracting the labour supply, leading to hiring difficulties for businesses operating in the UK.

The Institute for Fiscal Studies has analysed the economic credentials of the policies proposed by Reform UK, which call for an unprecedented reduction in the size of the state. The IFS concludes that Reform UK’s costings “do not add up” (IFS, June 2024). As such, it is best to view each of these proposals as illustrating one segment of the political debate, rather than a workable agenda for government.

 

NEXT STEPS: 4 JULY AND BEYOND

Polling day is Thursday 4 July. On 9 July, parliament returns for the election of the speaker. The state opening of parliament is set for 17 July, when the King’s Speech will set out the new government’s proposed legislation for the coming session.

Before the election was called, the House of Commons was scheduled to break for summer recess on 23 July. But if the Labour Party wins the general election, it may extend the sitting of parliament until early August to keep momentum up to implement its legislative priorities (FT, June 2024).

The first hundred days of a new government is a critical period of time. Whichever party wins the election, new secretaries of state and their special advisors will be entering government departments with the ambition and momentum of a recently elected administration.

With campaigning behind them, ministers will have to get up to speed with the regulatory and legislative complexities of government.

Both of the major political parties have signalled their openness to working with the private sector to broaden their understanding of the issues concerned.

Businesses have an important contribution to make to the development and implementation of effective policy, targeted at specific outcomes and minimising any unintended consequences that could unduly affect their commercial interests.

 

HOW WE CAN HELP

Our UK Government Affairs team supports companies to take a proactive approach to addressing the risks and opportunities arising from political change.

Unlike government affairs agencies, we combine political, legal and regulatory knowledge with an in-depth understanding of the workings of Westminster and Whitehall. As regulated Consultant Lobbyists, we’re experienced in supporting you to execute sophisticated engagement and advocacy strategies.

Our clients also benefit from the insights and understanding of our Strategic Consultants Lord David Blunkett, Lord Edward Garnier, Lord Gavin Barwell and Lord Andrew Tyrie.

Please contact Paul Hardy for further information on how we can support you to navigate the opportunities arising from a new government in the UK.