The cumulative pressures from the likes of Extended Producer Responsibility (EPR), the plastic packaging tax, the soft drinks levy, HFSS restrictions, rising National Insurance, and the Border Target Operating Model (BTOM) are estimated in total to be costing the industry around £2 billion (2025 figures).
While each policy is designed to address specific environmental, health or fiscal objectives, the onslaught of new regulations means burdens on industry are stacking up.
But the greatest pressure facing the food and drink sector is not the cost of implementing regulations; rather it’s the risk exposure and financial consequences of failing to keep up.
As companies expand across multiple markets, disconnected compliance systems are creating growing exposure to financial risk through the following:
- Tax and penalty costs
- Legal risk through employment classification and cross-border labour compliance
- Operational risk in the form of delays to market entry and supply chain disruption
In food and drink especially, where demand cycles are fast-moving and margins are tight, these risks are amplified when businesses attempt to scale internationally without structured compliance frameworks in place.
How the landscape has changed
For much of the past decade, regulatory development in food and drink has been challenging but navigable. New obligations tended to arrive sequentially, giving manufacturers the space and time to handle them.
However, today’s landscape is characterised by overlap rather than sequence. Environmental, health, employment, tax, and border regulations are being introduced or adjusted simultaneously, often with interdependencies that are not immediately obvious.
One of the clearest examples of growing regulatory pressure is the impact of EPR costs on manufacturers. Sausage brand Heck warned that new packaging obligations had resulted in a projected £153,000 EPR bill, after the business had already absorbed rising employer National Insurance contributions and increases to the National Living Wage.
The company suggested the additional costs would ultimately need to be passed on to consumers, highlighting how food manufacturers are increasingly dealing with simultaneous pressures rather than isolated compliance costs.
But the challenge extends beyond individual levies. Regulation in food and drink is no longer an isolated compliance issue, but an interconnected operational challenge. For example, HFSS reformulation affects ingredient sourcing, which in turn interacts with import controls under the Border Target Operating Model (BTOM).
Labour cost pressures are pushing operational changes that create employment classification and mobility risks across borders. For manufacturers operating across multiple markets, this can also create additional exposure regarding tax liabilities, workforce compliance, and cross-border operational risk.
In addition, annual revisions, delayed clarifications, and phased implementations mean businesses are effectively operating in a semipermanent state of regulatory transition.
Compliance is no longer confined to a single location.
Food and drink manufacturers pursuing growth in Europe, North America, or in emerging markets must now navigate multiple regulatory situations simultaneously - each with its own reporting standards, audit expectations, and enforcement approaches.
The overall effect is that compliance has become a serious risk factor that directly influences how, where, and whether businesses grow.
How regulatory complexity is creating a chain-reaction of risk
Packaging is a clear example of how regulatory change can create tangible legal and financial exposure. Manufacturers redesigning packaging to meet EPR recyclability thresholds may unintentionally reduce the percentage of recycled content, triggering plastic packaging tax liabilities.
A decision intended to reduce environmental impact can therefore create unexpected tax exposure unless the downstream implications are fully understood and modelled.
Manufacturers face similar challenges regarding product reformulation under HFSS rules which mandate the switching of ingredients to reduce sugar or salt and often necessitate onboarding new suppliers.
Where those suppliers are based outside the UK, BTOM requirements introduce new documentation, inspection, and timing risks. Without strong controls, this can result in consignments being held at the border, delaying and disrupting planned production and launch schedules.
Labour models in the food and drink industry are another red-hot risk area. Rising National Insurance costs and tightening visa quotas are driving manufacturers to reassess how they deploy roles such as engineers, auditors, quality specialists, and seasonal workers. However, operating across multiple jurisdictions raises complicated questions around employment classification, tax residency, and local labour law compliance.
Missteps, even if unintentional, can trigger serious consequences such as hefty fines, reputational damage, and backdated tax liabilities.
Food and drink manufacturing is also one of the UK’s largest users of agency workers. Under the Agency Worker Regulations, these workers must receive equal treatment after 12 weeks. However, because workers are often rotated between production lines or sites, employers can unintentionally trigger liabilities if they do not accurately track worker tenure across roles, agencies, and locations.
Why food and drink manufacturers are uniquely exposed
While regulatory pressure affects many sectors, food and drink manufacturers face a unique combination of vulnerabilities.
Perishability means that delays quickly translate into financial loss. Thin margins magnify the impact of even small compliance errors. High SKU turnover increases the frequency of regulatory touchpoints, multiplying the chance of something being missed. Heavy dependence on large retailers creates asymmetric risk, where non‑compliance can lead to immediate commercial consequences.
Labour reliance further compounds exposure. Engineers, auditors and seasonal workers often move across borders at short notice, creating complex employment, tax, and mobility risks that many businesses are not structured to manage consistently.
Together, these factors mean food and drink manufacturers have less tolerance for disruption than many other industries yet are operating in one of the most complex regulatory environments.
Balancing compliance with risks and the consequences of getting it wrong
One of the most difficult dynamics for manufacturers is that complying with one regulation often triggers new risks elsewhere.
A reformulation project may comply fully with HFSS requirements, only to introduce delays through supplier audits and BTOM documentation. Packaging changes aimed at meeting recyclability thresholds can alter product weight or dimensions, leading to new customs classifications and increased freight costs.
New reporting obligations under EPR rely on accurate, consolidated data. But when that data includes procurement, operations and third‑party suppliers, regulatory risks quickly form, causing businesses to fall into risky territory.
Meanwhile, changing employment models in response to UK cost pressures may inadvertently breach overseas employment laws if mobile workers are insufficiently assessed. In today’s environment, all compliance scenarios must be considered in concert with one another, as solving one requirement at a time can increase combined risk.
How food and drink manufacturers should respond
The first step is to move from reactive to integrated planning.
Compliance needs to be woven into all product and supply change decisions; and reformulation, sourcing, packaging and market entry must be assessed together, not one after the next.
For example, when businesses have one team solving HFSS mandates and another tackling packaging changes, and another managing costs, there is little visibility over cumulative compliance impact.
The next requirement is building flexibility into supply chains and operations, as rigid supply chains are vulnerable in a multi-regulation environment. Diversify suppliers to reduce sourcing risk, as well as build contingency into logistics and distribution timelines and standardise processes across markets.
Finally, compliance must be treated as a cross‑functional capability rather than a narrow legal function. Centralised oversight of regulatory risk, consistent frameworks for workforce deployment, and access to specialist expertise are becoming essential, particularly for global businesses.
By 2026 and beyond, success will not mean eliminating regulatory complexity. It will mean having the infrastructure, insight, and coordination to operate confidently within it, enabling food and drink manufacturers to continue to grow, without exposing themselves to avoidable risk.
About the author
Linah Aduda is the senior legal and compliance associate at Mauve Group - global EOR, HR consultancy and business expansion service specialists.
