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News - 20 August 2006

FSB slams supply chain security initiative

The Federation of Small Businesses (FSB) has responded angrily to a European Union draft Regulation on enhancing supply chain security. The proposal, should it be approved, will cost small and medium-sized enterprises (SMEs) across all sectors 55 billion Euros (£37 billion) without any clear benefits.

The European Commission's proposal aims to protect freight transport by road, rail and inland waterways against terrorist attacks. The proposal is that member states should be obliged to create a ‘quality label’ for security. Firms can subsequently be granted the status of ‘secure operator’ but, to be recognised as such, they must prove that there are no security gaps in their areas of responsibility. This will include screening employees and costly audits. The proposal foresees a voluntary phase running from 2006-2008 after which it would become compulsory.

The regulation would apply not only to goods coming in to the EU from abroad or travelling between EU member states but to items being transported within one country. Therefore, even small firms taking their products from Leeds to London would be affected. It would also affect businesses across all sectors from manufacturing to retail because each is a step in the supply chain from factory to shop.

However, the passenger transport system is the weak link in the chain, as demonstrated in the past and again in recent days. According to the FSB the business community is keen to play its part in fighting terrorism but does not support disproportionate action that will have a huge impact for little return. The FSB also criticises the Government for, “Not having the courage to propose a similar draconian system on passenger transport.”

It is due to be discussed on the fourth of September by the Council of Ministers where the FSB hopes it will be rejected. However, the proposal is being fast-tracked and the FSB fears that this will increase the likelihood of it being poorly implemented, hitting businesses very hard.

Tina Sommer, FSB European Affairs Chairman, said, "When British businesses, especially manufacturers, are competing against firms from the Far East or the US the last thing they need is disproportionate EU legislation like this as a millstone around their neck.

"The FSB is very concerned that the struggle to defeat terrorism, which we all of course support, is being misused to create a heavy-handed and bureaucratic system that will put many people out of work without actually increasing security.

"A founding principle of the EU is the free movement of goods and people. This proposal threatens to put a huge number of firms out of business, put up costs to the consumer and increase red tape on other companies. It also directly contradicts this founding principle of the EU with no tangible benefit. It must be dropped immediately."

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