Making social science accessible

27 Jun 2023

UK-EU Relations

Joël Reland surveys the regulatory reforms being considered for the small but rapidly growing British wine sector, contextualising recent developments in the wider post-Brexit regulatory landscape.

Bendy bananas, plastic-wrapped kippers, chlorinated chicken: the list of groceries used to illustrate to pros and cons of EU ‘red tape’ is rich and varied. They have served both as symbols of how EU regulation holds back British traders; and how it upholds key consumer protections.

Few on either side of the debate, however, are likely to have lost much sleep over the matter of wine regulation. Yet, seven years on from the vote to leave the EU, it stands as one of the most significant post-Brexit regulatory reforms embarked upon, with Defra currently consulting on a wide range of proposed changes in England and Wales.

Though it may sound esoteric, the rules around wine in fact serve as a neat allegory for many of the challenges the government faces in regulating after Brexit.

On one level, it reveals that lighting a bonfire of red tape is much easier said than done. The former Brexit opportunities Minister Jacob Rees-Mogg last year talked up a tsunami of changes to liberate the economy, yet what we have seen so far would best be described as a dribble.

This lack of change is largely down to the fact that businesses prefer having a single set of regulations to comply with – so establishing a separate UK regime complicates their lives and makes the UK a less attractive market. UK adherence to other international rulebooks (like the WTO’s) and regulatory inexperience are also factors.

The major effort now being put into wine regulation can thus be read as a sign that the UK is struggling to find any big-ticket items for deregulation after Brexit.

Yet, on another level, it indicates a government which is starting to take a more realistic, coherent view of the regulatory landscape post-Brexit.

Whereas Boris Johnson promised big regulatory change and delivered little, the Sunak government is happier to maintain alignment in general, and focus reform on more technical rationalisations – like revising alcohol duty structures so wine is taxed by alcoholic strength – which have an administrative logic (and mean cheaper Prosecco!) but will not deliver profound change.

Sunak’s government is also interested in divergence in niche, developing areas where the UK could gain a comparative advantage. And, though much of the talk is around AI and tech, wine also fits this agenda.

After all, it is a small but rapidly growing sector: sales of British wine rose 31% in 2021 and UK vineyard areas have increased 70% in five years (climate change, sadly, means Britain is likely to become ever-more suited to winemaking). Moreover, British wine is a something of challenger to the global hegemons, which could – if regulation is done right – diversify markets.

For example, Defra is proposing to overturn the EU-inherited ban on the sale of ‘piquette’ – an alcoholic drink made from grape pomace left behind during the wine-making process. The EU did this to prevent the over-supply of cheap wine: but the much smaller scale of domestic wine production negates the risk of such an inundation of the UK market.

Moreover, there is a growing international market for piquette as a cheaper, lower-alcohol and zero-waste alternative to traditional wine. For British wineries, the ability to sell it could allow them to diversify their product range and reach into new markets.

Similarly, Defra is proposing to allow wine to be de-alcoholised by up to 100% (rather than the EU cap of 20%), and to permit stoppers which can be plugged back into champagne-style bottles, allowing it to be better preserved after opening. Again, these changes would allow British winemakers to tap into the growing demand for lower strength/quantity forms of wine.

There is also a plan for a domestic ‘Protected Designation of Origin’ (PDO) regime, which grants wines from a specific region, with distinctive characteristics, rights to a protected name (‘Champagne’ being the most famous example under the EU regime), and denotes a guarantee of quality to consumers.

Defra proposes deviating from the EU in allowing ‘hybrid’ grape varieties to attain PDO status, as this will allow the development of more climate- and pest-resistant grapes, making wine production more innovative, sustainable and commercially viable. The countervailing risk, however, is that recognising too broad a spectrum of varieties means the British PDO label fails to establish a reputation for quality.

And indeed, that issue hints at a critical tension within the proposed reforms – and also across the wider post-Brexit regulatory picture – between promoting innovation and upholding consumer standards.

Consider the proposal to allow wine to be ‘transformed’ – through sweetening, carbonation or blending – after it is imported. This would allow, for example, importers of Italian wine to sweeten and carbonate it, and then sell it as a ‘fizzy Italian’ alternative to Prosecco.

The government says this will ‘boost our domestic industries’ by allowing the creation of ‘new product lines’ and a ‘better quality and variety of products’. However, others, like the Wine Anorak journal, fear it will allow such companies to ‘make very cheap wine, and make it look like more expensive wine’.

For example, an importer could source and blend the cheapest Chardonnays on the market and repackage them as a distinct Chardonnay with – thanks to changes to labelling requirements – its own variety and vintage information (implying a higher-end product).

The risk, therefore, is that proposals ostensibly designed to boost growth and innovation among small British wineries instead allow established importers to increase profits, by pushing out lower-quality wines which consumers could mistake for more established products.

Effective regulation could, of course, guard against some of these risks, through clear standards on naming, labelling and so forth: but Defra will have to show, in its consultation response, that it has thought about these risks and effectively mitigated them.

Though vastly different subject matters, the same regulatory tension will recur in other ‘growth sectors’ primed for reform: how does government promote innovation in AI or tech regulation, without compromising on product standards and consumer protection?

To understand the challenges at the heart of regulating after Brexit, the Roman adage still holds true: in vino veritas.

By Joël Reland, Research Associate, UK in a Changing Europe.

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