A farewell to the CE mark

Over the past week, I spent some time looking at the UK government’s draft amendments to legislation as a result of Brexit.  I also have had a look at the latest missives from the EU published in preparation for Brexit.  If you are in business, particularly businesses which involve the export and import of goods to and from the EU, this is a necessary process and I would urge you to take time to carry out such research.

There are eight weeks until the UK leaves the EU.  Suffice to say, everything is completely chaotic.  Not least the fact that the UK is way behind in its preparations for Brexit and parliament has reams of legislation to pass before we leave.

The parliamentary half term recess has been cancelled but even with that additional time (eight sitting days), it is unlikely that parliament can get all the necessary law in place before 29 March.  Seven acts of parliament and thousands of statutory instruments need to be passed before the UK leaves the EU for the law to operate.  It is highly unlikely that parliament can achieve that task in the time remaining.

The Department for Business, Energy and Industrial Strategy has taken a novel approach to the necessary amendments.  They have placed them all in a single set of regulations which runs to 619 pages.  This document covers the law of weights and measures, environmental law, product safety and some matters of food law.  Normally such amending legislation would be separate documents classed by subject matter.

The effect of this draft law is to remove all references to the European Union from existing UK law.  It is very much placing a sticking plaster on an amputated limb.  it is a temporary measure and it is unlikely that the amended law will stand for long after Brexit.

One result of the draft legislation is that the CE mark will be removed from UK goods.  The BBC reported on Friday that the UK will replace the CE mark with a new UK Certified Approved mark, UKCA.  This new mark has yet to be published, so with eight weeks to go, manufacturers have no idea as to the certification marks they will need to put on products made for the UK market.

The proposed UKCA mark also appears to be a complete misunderstanding of the purpose of CE marking.  The appear to believe it is a quality mark similar to the old BSI kitemark.  It isn’t.

The old BSI kitemark was a quality mark that told consumers that a product complied with a particular BS standard e.g. double glazing.

The CE mark is a declaration that certain categories of products comply with EU law (regulations and directives).  It shows that the product complies with the general product safety requirement of a particular EU law e.g. You test to the general safety requirement of the Toy Safety Directive, you do not test only to the terms of EN71 the EU safety standard.  Most toys designed for infants are tested to EN71 but also to the baby’s dummy bite test from the UK safety standard.

The CE mark applies to what are called ‘new approach directives’.  There is plenty of EU product safety law where the CE mark is not used e.g. The General Product Safety Directive.

New approach directives allow for type approval.  This means an example of the product is tested for compliance.  The manufacturer also has an approved quality assurance system which ensures that all further production of the product is identical to the tested example.  This removes the need for external batch testing of production and thus reduced costs.

So the CE mark is a compliance mark, but it goes further.  It is also a passport mark.  It allows goods to cross internal state borders within the EEA with no further need for certification or inspection.  So a French manufacturer can have his products certified in France and sell them in Germany.

It is clear that the new UK certification mark will not act as a cross border certification passport.  One must ask why this new mark is necessary as it is a criminal offence to sell unsafe and uncertified goods even if they are not marked.  If the mark is not a compliance passport, it simply reverts to the status of a quality mark like the old kitemark.  The main purpose of the CE mark is lost.

The CE mark was extended to metrological equipment when the market in weights and measures technology was opened.  It allowed manufacturers of weighing and measuring equipment to have them approved in one member state and to sell them across the EU.  This is why the old crown mark disappeared from pint glasses to be replaced by the CE mark.  There is no indication as to what will replace the CE mark on UK manufactured metrological equipment.  I suspect we will go back to the old crown verification mark.

On 1 February, the EU published a question and answer document relating to ‘industrial goods’ exported into the EU after Brexit.  This clearly states that UK producers will no longer be able to apply the CE mark, but it goes further.

It clearly states that UKAS, the United Kingdom Accreditation Service will lose its permission to award notified body status to test laboratories.  UKAS had been campaigning for a continuation of this permission but the EU is clear that it will be removed.  The EU document states that there will be little or no change to existing notified body approvals.

This means that UK test laboratories will no longer be able to issue CE mark type approval permissions to UK businesses.  This affect a wide range of products from toys to industrial machinery.  New models of these products will have to be certified in an EU state before the will be allowed into the EEA.

EU law is clear that responsibility for product safety compliance lies with the responsible person within the EU.  Currently that would be a UK-based manufacturer.  However for goods from ‘third countries, responsibility switches to the manufacturer’s agent within the EU or the person who first imports the goods into the community.  What this means is that UK manufactures wanting to export to the EU will have to arrange for an EU-based agent or to allow the customer importing their goods to the EU to act on their behalf with regard to the safety compliance of their goods.  This adds costs.

There is also a duplication of product testing and certification costs.  Firms will have to have test certificates for both the new UK certification mark and the CE mark.  Their quality assurance systems will have to be certified by an EU certified body and the new UK certification body (likely the British Standards Institute).  This is potentially a massive increase in costs.

Major manufacturers based outside the EU, such as Dyson with his vacuum cleaners (made in Malaysia) will have to consider where they will get products certified. For example, do they achieve type approval for an EU market of 550m potential customers; or do they spend the same amount to achieve certification in the UK, a market of 65 million potential customers.  I suspect many firms will prioritise EU certification over UK certification.

The other big news story this weekend was the rumour that Nissan was changing its decision to produce the new Xtrail 4X4 at its Sunderland plant.  This is not a surprise.  80% of Sunderland’s production goes to the EU.  There are major concerns regarding the application of tariffs and on rules of origin being applied to this EU export production as it will substantially increase the cost of production. Eighty percent of the Sunderland production is sent into the EU.  The EU/Japan free trade agreement, removing tariffs and allowing for regulatory equivalence, went into operation on 1 February.

However, there are other concerns.  All EU type approvals for UK produced vehicles lapse in March.  Nissan and other car producers will have to have all their models type approved in another EU state.  There will be no EU approved body for vehicle certification in the UK.  Again this increased costs.

Nissan is one-third owned by Renault.  So it clearly makes sense to locate production of new models within the EU and not in a ‘third country’.

This is the rubber hitting the road of Brexit.  The removal of CE marking and the loss of UKAS as an approval body for EU notified body status signal large increases in cost and restrictions in the ability to move goods across borders.

It is worth noting that the UK government preparation papers for no deal state that businesses reliant on, or with exposure to, EU markets should move their company registration to an EU state in preparation for Brexit so as to ensure continuity.  Such a move would take businesses out of UK corporation tax jurisdiction.

There has been much talk regarding tariffs in the politics of Brexit.  The removal of the CE mark from the UK is a clear signal as to new, non-tariff barriers, which will hobble UK manufacturing.

The reason Philmus Consulting exists

I am not a regular listener to The Archers; the BBC Radio Four tale of everyday country folk; but of late I have taken to working with the radio on to provide background noise.  I have therefore become aware of the latest goings on in Ambridge.  There has been significant media attention paid to the storyline of Helen Archer and the psychological abuse she suffered at the hands of her psychopathic husband Rob.  This ended with Helen stabbing Rob but being found not guilty of attempted murder when his abusive nature came to light.

However, it was not the Helen Archer storyline which grabbed my attention but the arrival in the village of two new characters, Rex and Toby Fairbrother.  The brothers arrived with the intention of starting an egg production business.  Despite the concerns of some of the locals, they managed to rent some land and get the Grundy clan to build them a hen-house.  Their business immediately caused arguments, particularly the existing organic egg supplier in the area.

Suffice to say, the egg business did not match up to the Fairbrother’s expectations.  They therefore decided to buy some geese and fatten them up for the Christmas market.  Again existing local businesses had their noses put out of joint, particularly the Grundy’s who had traditionally supplied turkey’s to local businesses and consumers.

Rex Fairbrother appears to be a grafter but his brother is less reliable.  Toby Fairbrother’s bio on The Archer’s website includes the following passage; “”Never short of ideas but lacks the commitment to turn a business plan into a money-making reality”.  The word plan is a bit misleading.  What they mean is business idea as Toby never appears to properly plan anything.

Things came to a head just before Christmas.  Toby was left in charge of the hen-house but forgot to properly secure the gate.  A fox got in and there was a chicken massacre.  the two brothers fell out and following some fisticuffs in The Bull, Toby left the business.

Toby didn’t appear too concerned about this turn of events and soon he was on to his next money-spinning venture, an artisan gin distillery.  This scheme failed to get off the ground almost immediately.  Firstly, Toby seemed unable to produce a consistently reliable product.  Secondly, he hadn’t considered that he needed a distilling licence from HMRC and needed to follow the bond procedures.

You may be wondering why I have spent so long describing a storyline from a popular daily soap opera.  Well, it is because it rings true and I have seen circumstances very similar to that experienced by the Fairbrothers.  The Archers began in the late 1940’s as a way of providing information to farmers and rural businesses in an entertaining manner.  It soon turned into a soap opera.  However, to this day, the programme retains an agricultural business advisor and I suspect that individual has had significant input into the Fairbrother storyline.

During my long career in Trading Standards, I came across many businesses who were in similar circumstances to the Fairbrothers.  At one stage, I had one ‘entrepreneur’ who turned up for advice on a different business idea virtually every week.  Few of his business ideas had any real prospect of reaching fruition and many were in direct contravention of UK law.  At least that individual was willing to seek advice but I see many more small businesses who seem unwilling to seek advice or to plan properly.

I attend business networking groups and I have gone through the business start-up process.  I am therefore fully aware of the issues facing small businesses.

My experience with trying to get funding for my business has raised some issues. Most funders ask for a business plan. this is usually focused on financial growth forecasts.  In short, they want to know that they are getting their loan capital back.  Often the only other questions asked are for a SWOT analysis and a description of the business.  Very few questions are asked about strategy or how strengths are going to be used to combat weaknesses.

At the networking groups I attend, there is a steady procession of new businesses.  Many of these are individuals newly pushed into self-employment and some appear to have little more than a basic business idea.  Take the example of one such business, a cosmetics manufacturer.  I got chatting to this individual and she seemed unaware that the law required her to register with the EU and to send copies of her packaging to the appropriate EU agency.  She had partly followed the cross-European labelling regime for cosmetics but certain required information and symbols were missing.  She wasn’t keeping the required product technical file and she was completely failing to meet the requirements as to cosmetics under the UK weights and measures regime.  This individual initially appeared offering marketing consultancy work (without apparent qualifications) but soon switched to the cosmetics idea.

I have seen ‘businesses’ which are little more that Ponzi schemes.  I have seen some network marketing businesses which seemed to be good opportunities but others which are little more than illegal pyramid schemes. I have seen businesses which are little more than the provider of pin-money.  I have also seen an awful lot of ‘me too’ businesses.

Toby Fairbrother’s gin distillery is a ‘me too’ business.  One person jumping on a fad which others had already started.  I first saw this with jam-making.  Every farmer’s wife and WI member in my local patch appeared to want to start a business selling their jam.  I next saw it with micro-breweries, then it was cup cake manufacture and most recently artisan gin distilleries.  Mostly, these businesses were all trying to attract the same target customers in the same niche segment.  These markets became saturated and many of these businesses either struggled or collapsed.  Ask yourself, how many cup cake businesses started a couple of years ago are still operating?

Fifty six percent of SMEs fail within the first five years.  In the restaurant sector things are much worse. Eighty percent of new restaurants fail within the year.  The number of people being forced into self-employment has rocketed and research shows that the vast majority of them earn far less than they did as an employee.  Many are struggling to make ends meet.

I have also seen presentations from ‘small business guru’s’ offering a range of solutions for small businesses.  Some of these offer ‘magic bullet’ solutions to growth and income generation.  Some are little more than motivational speakers.  others provide a decent service but either tie businesses in to long-running contracts or charge excessive fees.

There is no magic bullet.  Running and growing a business takes effort, resources and the ability to take expert advice.

I started Philmus Consulting because I foresaw that local authority trading standards services were no longer able to give in-depth guidance to small businesses.  I started Philmus Consulting because I saw small businesses were often created without proper planning and marketing expertise.  I started Philmus Consulting because I saw that there was a clear need to provide a level of marketing science and regulatory advice to small businesses which would more normally be found with their bigger counterparts.  I started Philmus Consulting because I know that I have the professional knowledge and experience to give that advice and as such I can help small businesses survive and thrive.

So, don’t be Toby Fairbrother; don’t be one of the many small businesses destined for short-term failure.  Contact Philmus Consulting today and put your business on a secure footing.