16th July 2019

The cost of compliance

Achieving compliance can sometimes be expensive for responsible businesses – but the cost rises for everyone when negligent firms are able to operate with impunity.

By Matthew Chapman
Freelance writer for JTS
The only way you are going to find a lot of the rogue traders is to have more trading standards officers to go out and fight them
If you can find some way of saying that your products are ‘head and shoulders’ above the rest because they include safety features that are higher than those required by the safety standards, then you can actually gain a market advantage

Regulations enforcing trading standards should theoretically create a level playing field for everyone. However, problems continue to emerge because a lack of enforcement action is placing compliant companies at a competitive disadvantage against rivals who undercut prices by cutting corners.

One area where this is clearly evident is the enforcement of the Construction Products Regulation (CPR). In July 2014 it became a legal requirement for businesses to secure CE marking for structural steelwork and aluminium in order to show compliance with the harmonised European standard that applies to structural metalwork (EN 1090-1). This compelled British businesses to plunge significant investment into ensuring they were compliant.

One such company was Yorkshire-based steel fabricator P&W Site Fixing. The firm had been saving to invest in a powder coating operation, but when the issue of CE marking arose, those £20,000 in savings had to be diverted to ensure 1090 compliance. That money was spent on initial set-up costs, which included training and testing of its welders, the calibration of equipment, and a number of audits. In addition to these set-up costs, there are also recurring annual fees that include the testing of new staff on welding procedures. These tests cost £275-£350 each and at the last count P&W Site Fixing had nine welding procedures.

It is clear compliance is not cheap, but for responsible businesses such costs are acceptable to ensure safety and quality. However, the system falls down when unscrupulous companies undercut prices by ignoring regulations, safe in the knowledge there will be no negative repercussions.

Company Secretary at P&W Site Fixing, Kay Wilson, believes this is exactly what is happening to her business. She has expressed concerns about the lack of response from trading standards to complaints about the imbalance in compliance of the construction product regulations, and claims that such inequities in the enforcement regime unfairly punish those companies that invest in compliance, leaving them at a disadvantage to firms who ignore their legal requirements under the CPRs.

Robert Chantry-Price, Joint Lead Officer for Product Safety at CTSI, says, “Many complaints from businesses when presented to a third party, such as the trading standards service, fall down because of a lack of evidence. Within each trade there is often a lot of muttering about rivals selling products that are not CE marked, or conforming to the relevant safety standard.

“If I were a trading standards officer examining a compliant of this nature I would expect the complainant to present some evidence to support their assertion.”

Wilson believes a couple of companies  working on a housing development alongside P&W are not CE compliant. She says her own investigations have led to one of the company’s owners boasting about this to her. Wilson phoned the company under the guise of adding it
to P&W’s approved supplier list for
laser profiling.

“I had a big conversation with them and said ‘all I need now is your 1090 certificate’ and he told me they don’t have it,” says Wilson. “He actually said ‘idiotic companies we work for don’t even realise that we have to have it by law’.”

Lack of resources

The notion of testing a rival’s products for compliance is likely out of the financial reach of many a company. “I’m involved with a toy company that is about to spend £20,000 on testing its toys before placing them on the market,” says Chantry-Price. A complainant company would therefore need to spend a similar sum on product testing should it wish to present evidence that their rival’s products are non-compliant.

Compliant companies would, however, argue that the onus should not be on them to test the products of rival companies, but this should be carried out by their home authority’s trading standards team. Unfortunately, the sad reality is that trading standards resources have been cut to the bone. Chantry-Price believes trading standards teams are not ignoring complaints, but it is a simple case of services often not having adequate resources to investigate.

The issue of companies flouting Construction Products Regulation is by no means a new one, and P&W’s troubles are no isolated case. Four years ago members of the Rural & Industrial Design & Building Association (RIDBA) raised the issue of a lack of enforcement action, and in turn sought help from Jo Churchill MP.

In correspondence between CTSI Chief Executive Leon Livermore and Churchill in August 2015, Livermore revealed his frustrations over the matter. He told Churchill: “We are aware that prioritisation due to lack of staff and resources means that some legislation is given less attention.

“We accept that this is an unacceptable situation and unfortunately we foresee more issues as local government budgets are cut further.”

At the time, Livermore suggested a solution to the problem of the unlevel  playing field around compliance. CTSI noted that investigating non-compliance of CPR was unlikely to be a priority for any single local authority. A solution raised by Livermore was for the government to appoint and appropriately resource a single service to operate as a lead authority on the issue.

This would have enabled a centre of excellence for CPR issues and a useful resource for businesses that comply with the law. Such a model has been used successfully to resolve issues that could distort the market at a national level, but would not naturally be dealt with as a local authority priority. Livermore raised the proposals with the relevant government departments for consideration, but never received a response.

RIDBA has subsequently set up a primary authority agreement with Dorset Trading Standards to allow members to approach a team with the required expertise, according to RIDBA chairman Michael Hammond. “What we were finding was our members were going to their local trading standards who did not have a clue about it,” says Hammond.

Dorset Trading Standards has received six complaints since it began working with RIDBA, but half the accused companies are using Brexit uncertainty as an excuse for non-compliance.

No court action has yet been taken against any of the companies and any potential action will likely occur once the outcome of Brexit is clear in order to build a stronger case against the non-compliant firms, according to Martin Thursby of Dorset Trading Standards.

Mixed message

Kevin Frewin, certification group manager at the British Standards Institute, says he is regularly asked how many times a company has been taken to court. “The research that we’ve done would indicate that there have been no cases that have reached the courts for the Construction Product Regulations (CPR),” he says.

Wilson believes the way the current system operates actively encourages non-compliance. “It is really annoying that we are having to comply yet there is no policing of what we and everyone else is supposed to be doing,” she says. “I think every steel fabricator should be registered with 1090 and all go on a database.”

At the moment there is no national or international database for CE marking. The European Commission was seeking to set one up many years ago, but it never received the required funding. Hammond has been lobbying government for a national register of CE marked companies during his chairmanship of RIDBA, but to no avail so far.

The only kind of current database available is the 1090 Register, which is run by a private company and not related to any notified body or official organisation. Frewin describes the 1090 Register as effectively a marketing tool for companies that have certification. As a result, not all compliant companies are on the register and it cannot be used by customers or regulators as an exhaustive list of those who are compliant.

Frewin believes any official database would be extremely hard to implement because of the complexity involved: “You would end up having to list every size, every shape, every colour, every model of every product, and the database suddenly grows exponentially. You probably wouldn’t have suitable search functions.”

If a database is not forthcoming, then the only way an even playing field will come to pass is through more proactive enforcement action following tip-offs. The current lack of funding of trading standards teams means this is unfortunately unlikely.

“The only way you are going to find a lot of the rogue traders is to have more trading standards officers to go out and fight them,” says Chantry-Price.

Richard Collin, head of national and European Policy at BSI, believes it is a difficult time for enforcement. “I started my career as a trading standards officer and I can see the differences now in numbers, compared to how it was before – and [even then] it was quite a struggle,” he says.

Concern over enforcement action is by no means confined to the UK.

“It is really something that’s always been a concern within Europe about whether regulations are sufficiently enforced and how that is done,” says Collin. However, the internal troubles faced by trading standards teams are unlikely to provide comfort to compliant companies losing out to rival businesses that ride roughshod over regulations.

“It properly sticks in your throat when you are trying to do the best you possibly can, and you are just getting battered from all directions,” says Wilson. “It is all a bit of a mess and you try and do the right thing but by doing the right thing you are getting less work.”

If no help arrives from regulators, one way compliant businesses can attempt to turn the situation to their advantage is to highlight their compliance in a marketplace where competitors flout their legal obligations.

Chantry-Price observes: “If you are a really good company and can find some way of saying that your products are ‘head and shoulders’ above the rest because they include safety features that are higher than those required by the safety standards, then you can actually gain a market advantage by selling this feature to your customers.”

The steel industry is only the tip of the iceberg and is symptomatic of a wider malaise. Trading standards when properly enforced creates a level playing field. But a drastic cut to funding has hit trading standards teams hard and a lack of resources has led to businesses and consumers alike becoming collateral damage.

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