Restricting promotions of food and drink high in fat, sugar or salt: business and regulatory impact assessment - partial

4. Options

Options Developed

To develop the options under consideration, we characterise the policy along three dimensions:

• What food products
• What forms of promotion
• Places that would be subject to restrictions.

The four options under consideration are summarised below. In all options, we envisage the following sectors being directly affected: retailers, out of home, manufacturers, and local government through enforcement costs.

Option 1 – do nothing

In this scenario, there are no new regulations on the promotion of HFSS foods which would be brought into force. We therefore assume no impact on current population weight trajectories. The current costs of overweight and obesity are therefore borne for the duration of the modelled period.

We compare all other options to this option – i.e. the results of the costs and benefits of the other options are the difference between that option and the ‘do nothing’ baseline. Over the modelling horizon, government could choose to pursue other policies that complement or mediate the effects of policies considered here. Industry may also implement restrictions voluntarily in the absence of regulations, particularly if there are restrictions in place in other areas of the UK and businesses operating across the UK align their promotional activity and practices. We do not attempt to quantify these impacts.

Option 2 – Price (volume, e.g. multi-buy) and location restrictions for discretionary foods and ice cream and dairy desserts, no exemptions

Products where the restrictions apply will be defined by:

• Checking if a product matches the Food Standards Scotland definition^[25] of a discretionary food
• Then applying a Nutrient Profile Model
• Products that are discretionary AND fail the NPM would be in scope for the proposed restrictions.

The restrictions would apply to: retailers and the out of home sector (which includes cafes, restaurants, bars etc.). There would be no exemptions based on size of business.

In this option, we consider the restriction of location promotions and also volume price promotions “i.e. multi-buy”. "Multi-buys" are defined here as (a) two or more separate products sold together to obtain a discount or (b) one or more products given free as a result of a purchase^[26].The restriction of wider price promotions (i.e. Temporary Price Reductions, meal deals etc) is not included.

Option 3 (a, b, c) – price (volume, e.g. multi-buy excluding meal deals and TPRs) and location promotion restrictions for discretionary foods and ice cream and dairy desserts and additional foods, exemptions for micro and small businesses for all restrictions or location restrictions, considered alongside no exemptions.

Option 3(a) This option uses the same set of restrictions as Option 2, but expands the targeted food products beyond the discretionary classification to include categories of most concern to childhood obesity which also fail an NPM test. (This would be broadly in line with the regulations in England.)

Additionally we consider the effects of exempting micro and small businesses from all the restrictions (Option 3(b)), and also from exempting them only from the location restrictions (Option 3(c)). Micro and Small businesses are defined as those employing fewer than 50 people at the enterprise level.

Option 4 (a, b and c) – price (all price promotions – volume, e.g. multi-buy including meal deals and Temporary Price Reductions) and location promotion restrictions for discretionary and ice cream and dairy desserts and additional foods, exemptions for micro and small businesses for all restrictions or location restrictions only, considered alongside no exemptions.

The set of products within scope is the same as in Option 3(a), however restrictions are expanded to include all price promotions beyond volume multi-buy offers including meal deals and Temporary Price Reductions.

Exemptions for micro and small businesses for all restrictions (Option 4(c)), or location restrictions only (Option 4(b)), are considered alongside no exemptions for any promotion (Option 4(a)).

Sectors and Groups Affected

To understand the impact of the policy propositions on the economy, we develop different calculations for each sector affected. To define the impacts on private sector businesses, we make use of the Scottish Business Survey and Standard Industrial Classification (SIC) codes at the 5-digit level. This section presents background data for the sectoral impacts presented in section 12. The primary impacts of the policy proposals are on subsets of the following sectors: Retailers (SIC 47); the Out of Home sector (SIC 56); and Manufacturers (SIC 10).

We also include the impacts on health (direct health benefits to individuals, impacts on NHS and Social Care costs); and government (costs of enforcement).

The following sections outline the scope of the sectors affected. Throughout, we make reference to enterprise and unit level. Enterprises are the number of businesses operating in a sector, and units are the number of premises operated by enterprises, i.e. individual stores.

Retail Sector

We assume that the following retailer enterprise types will fall within the scope of the restrictions, based on their Standard Industry Classification 5-digit code – Table 1. We assume that other than exemptions by size, the same businesses would be in scope irrespective of the products targeted or types of restrictions imposed.

Table 1: Retailers within scope of restrictions by 5 digit SIC code

Food and Drink Retail

47110 : Retail sale in non-specialised stores with food, beverages or tobacco predominating

47210 : Retail sale of fruit and vegetables in specialised stores

47220 : Retail sale of meat and meat products in specialised stores

47230 : Retail sale of fish, crustaceans and molluscs in specialised stores

47240 : Retail sale of bread, cakes, flour confectionery and sugar confectionery in specialised stores

47250 : Retail sale of beverages in specialised stores

47290 : Other retail sale of food in specialised stores

47810 : Retail sale via stalls and markets of food, beverages and tobacco products

Non-food retailers

47190 : Other retail sale in non-specialised stores

47300 : Retail sale of automotive fuel in specialised stores

47620 : Retail sale of newspapers and stationery in specialised stores

Table 2 summarises the number of enterprises, by number of employees, from the Inter Departmental Business Register^[27] in these categories. Based on this we estimate that 5,670 Scottish retail sector businesses will be affected by this policy. There are 4,730 food-related enterprises and 940 non-food enterprises that will also be in-scope due to selling low volume of food items as part of their business. It should be noted that each business which operates under a franchise agreement as part of symbol group would still count as an individual businesses in these statistics.

Table 2: Number of registered retail private sector businesses in Scotland by sector, division, employee sizeband (by total number of employees in UK), 2022

Description	Business Size				Total Businesses
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Food and Drink Retail	4,195	475	35	25	4,730
Non-food retailers	790	100	15	30	940
Retailers total	4,985	575	50	55	5,670

The costs to businesses of these restrictions will fall at both the enterprise level (the business) and the unit level (individual stores). Table 3 presents the number of units in scope for the policy based on the number of employees at each local unit. 9,310 local units are expected to be in scope for this policy. There are 7,230 food-related units, and 2,080 non-food units in scope.

Table 3: Number of retail business sites of registered private sector businesses in Scotland by number of employees at the local unit, 2022

Description	Number of business sites in Scotland (split by number of employees at business site)				Total number of business sites
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Food and Drink Retail	5,085	1,820	255	70	7,230
Non-food retailers	1,350	655	65	5	2,080
Retailers total	6,435	2,475	320	75	9,310

The number of units for businesses of different sizes is presented in Table 4. This highlights that while there are only a small number of large businesses, those large businesses have a significant number of different units (i.e. individual stores) across their business. This is important when considering potential exemptions from restrictions if these are applied at the enterprise level rather than individual unit level.

Table 4: Number of retail business sites of registered private sector businesses in Scotland by number of employees in business in UK, 2022

Description	Number of business sites in Scotland (split by number of employees in businesses in UK)				Total number of business sites
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Food and Drink Retail	4,230	655	240	2,110	7,230
Non-food retailers	800	145	80	1,050	2,080
Retailers total	5,030	800	320	3,160	9,310

Take home grocery sales

The proposed policy measures will have an impact on retailers’ sales and therefore profits. To calculate these impacts, we use data from Kantar that estimated the total value of take-home grocery purchases in Scotland at £10.5 billion in 2022^[28].

Products in-scope for the proposed policy differ across the options. Option 2 includes discretionary foods and ice cream and dairy desserts (Option 2 in the public consultation), while options 3 and 4 include categories that are of most concern to childhood obesity, which is discretionary foods, ice cream and dairy desserts, breakfast cereals, sweetened yoghurt and fromage frais, pizza, ready meals, and roast potatoes, chips and similar potato products (Option 3 in the public consultation).

Analysis provided by FSS shows that, by value, discretionary products and ice cream and dairy desserts make up 21.2% of Scottish consumers’ purchases, and including additional products in scope brings the total share of spending to 29.8%^[29].

Table 5: Discretionary and ice cream and dairy desserts (*) and additional food product shares, Scotland 2022, Kantar provided by FSS (report in preparation)

Category	Proportion of total grocery spend (%)
Sweet biscuits*	2.2
Total confectionery*	4.8
Cakes and pastries + higher fat/sugar morning goods*	3
Crisps and savoury snacks*	2.9
Puddings and desserts*	1.2
Ice cream and edible ices (excl. frozen dairy desserts)*	1.1
Regular soft drinks (excl. water)*	6
Discretionary and ice cream and dairy desserts sub-total	21.2
Breakfast cereals	1.4
Total ready meals	3.6
Yoghurt and fromage frais	1.5
Pizza	1.2
Roast and processed potatoes	0.9
Additional products sub-total	8.6
Total	29.8

Table 5 summarises this by food category, where categories annotated with an * are classed as discretionary products and ice cream and dairy desserts.

Out of Home Sector

The policy proposals apply to food sold in the course of a business. This includes the out-of-home sector (OoH). Following the approach to retailers, we summarise these businesses using the Standard Industry Classification system ONS codes, used to classify business establishments by the type of economic activity in which they’re engaged. Table 6 shows the businesses we assume are in scope of the policy (irrespective of foods or restrictions in scope).

Table 6: OoH within scope of restrictions by 5 digit SIC code

Accommodation

55100 : Hotels and similar accommodation

Food and drink services

56102 : Unlicensed restaurants and cafes

56103 : Take away food shops and mobile food stands

56210 : Event catering activities

56290 : Other food service activities

56302 : Public houses and bars

56101 : Licensed restaurants

There are 13,120 OoH enterprises in scope in the sector, maintaining 15,990 units. The set of enterprises (Table 7) and units (Table 8), by employment in UK in enterprise and individual unit respectively are presented below.

Table 7: Number of registered OoH private sector businesses in Scotland by sector, division, employee sizeband (by total number of employees in UK), 2022

Description	Business size				Total businesses
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Accommodation	845	615	135	45	1,645
Food and drink services	9,030	2,240	115	90	11,475
Out-of-Home total	9,875	2,855	250	135	13,120

Table 8: Number of OoH business sites of registered private sector businesses in Scotland by number of employees at the local unit, 2022

Description	Number of business sites in Scotland (split by number of employees at business site)				Total number of business sites
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Accommodation	885	900	185	5	1,980
Food and drink services	10,135	3,620	245	5	14,010
Out-of-Home total	11,020	4,520	430	10	15,990

As with retailers, the number of local units for different size enterprises (employees across UK) is shown in Table 9.

Table 9: Number of OoH business sites of registered private sector businesses in Scotland by number of employees in UK in business, 2022

Description	Number of business sites in Scotland (split by number of employees in businesses in UK)				Total number of business sites
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Accommodation	850	650	205	275	1,980
Food and drink services	9,045	2,490	365	2,105	14,010
Out-of-Home total	9,895	3,140	570	2,380	15,990

Manufacturers

We also model the impact of the policy on manufacturers in Scotland. We anticipate that the proposed restrictions will lead to a net reduction in sales of food, with the fall in sales of restricted foods being larger than the compensatory increase in sales of non-HFSS foods. This reduction will feed back to manufacturers.

There is limited evidence of the impact of the UK Government restrictions on location promotions of HFSS foods in England given the relatively short time since their introduction in October 2022. However, early descriptive analysis from Kantar following the first six months of restrictions being in place in England noted apparent changes in consumer behaviour in the categories impacted by the legislation. For instance, in the 12 weeks to 19 March 2023, they observed a movement of £82 million away from HFSS products within the legislation categories, with £34.4 million of this moving to healthier non-HFSS alternatives. However, no assessment was provided on the impact on total food and drink expenditure.^[30]

Again following the structure above, we use Standard Industry Classification codes to define the manufacturers in scope that are likely to be most affected by the policy proposals.

Table 10: Manufacturers number of Enterprises, Scotland 2023^[31]

Industry	Total	Micro (0 - 9)	Small (10 - 49)	Medium (50 - 249)	Large (250+)
10520 : Manufacture of ice cream	30	15	10	0	0
10821 : Manufacture of cocoa, and chocolate confectionery	30	20	10	0	0
10822 : Manufacture of sugar confectionery	20	5	10	5	0
10310 : Processing and preserving of potatoes	5	0	0	0	0
10612 : Manufacture of breakfast cereals and cereals-based foods	5	5	0	0	0
10720 : Manufacture of rusks and biscuits; manufacture of preserved pastry goods and cakes	35	20	10	10	0
10850 : Manufacture of prepared meals and dishes	25	20	5	0	0
10519 : Manufacture of milk products (other than liquid milk and cream, butter, cheese)	10	10	0	0	0
10710 : Manufacture of bread; manufacture of fresh pastry goods and cakes	260	170	70	15	5
11070 : Manufacture of soft drinks; production of mineral waters and other bottled waters	30	25	5	0	0
Manufacturers in scope	450	290	120	30	5

Local government

To enforce the policy, there are direct costs to Scotland’s 32 local authorities in terms of familiarising their staff with regulations, and in terms of using time during visits to businesses to establish whether regulations are being followed. To help inform estimates and costing implications for local authorities we have been working with the Financial and Delivery Considerations Group to facilitate engagement between Scottish Government, Food Standards Scotland, local government and enforcement professionals to support effective enforcement of the policy.

Health

The policy is intended to reduce the number of calories consumed via HFSS products, as well as shifting the nutritional content of diets towards healthier products.

This will have direct health benefits to individuals, and reduce spending in the NHS and Social Care sectors by reducing the likelihood of individuals developing obesity and other diet-related health conditions. While the transition costs to businesses and the expected reduction in sales of HFSS foods as a result of restricting promotions will be immediate, the health benefits from reduced calorie intake and improved nutritional intake will take longer to feed through into reduced disease prevalence, and therefore the economic and social benefits associated with the policy. As such, the costs and benefits are considered over a 25 year policy period to allow time for the beneficial impacts to materialise. The further into the future a benefit arises the less weight it carries in the overall estimation of the Net Present Value due to the discounting of costs and benefits by 3.5% each year into the future.

There will also be an improvement in economic productivity due to reduced absence, arising from these health improvements.

Affected Employees

We make a number of assumptions about how businesses will respond to the policies. In particular we estimate the one-off costs transition costs of familiarisation and implementation by using illustrative costs of different workers’ time. We use data from Annual Survey of Hours and Earnings^[32], taking the average (mean) 2022 wage cost to estimate the resource costs after the addition of non-labour employment costs (assumed as a 30% increase over wage costs). The job definitions, and hourly wages, are summarised in Table 11.

Table 11: Hourly pay - Excluding overtime (£) - For all employee jobs: United Kingdom, 2022^[33]

Year	Region	Description	Code	Median pay	Mean pay
2022	UK	Shopkeepers and proprietors – wholesale and retail	7131	12.68	16.77
2022	UK	Managers and directors in retail and wholesale	1150	14.58	18.17
2022	UK	Sales assistants and retail cashiers	711	10.15	11.23
2022	UK	Purchasing managers and directors	1134	24.85	26.53
2022	UK	Programmers and software development professionals	2134	23.51	24.99
2022	UK	Stock control clerks and assistants	4133	12.16	13.39
2022	UK	Restaurant and catering establishment managers and proprietors	1222	12.51	13.78
2022	UK	Catering and bar managers	5436	11.64	12.62
2022	UK	Food preparation and hospitality trades	543	11	11.81

Uprated wage to account for non-wage labour costs			Adjustment	Median pay	Mean pay
2022	UK	Shopkeepers and proprietors – wholesale and retail	30%	16.48	21.80
2022	UK	Managers and directors in retail and wholesale	30%	18.95	23.62
2022	UK	Sales assistants and retail cashiers	30%	13.20	14.60
2022	UK	Purchasing managers and directors	30%	32.31	34.49
2022	UK	Programmers and software development professionals	30%	30.56	32.49
2022	UK	Stock control clerks and assistants	30%	15.81	17.41
2022	UK	Restaurant and catering establishment managers and proprietors	30%	16.26	17.91
2022	UK	Catering and bar managers	30%	15.13	16.41
2022	UK	Food preparation and hospitality trades	30%	14.30	15.35

Exemptions by business size

A number of the options consider the impact of the policies if micro and small businesses were exempt from location and/or price promotion restrictions. To consider the potential impact on sales we exclude the share of sales (revenue) which come from micro and small businesses from the expenditure from both retail and Out of Home calculations. The revenue in the sectors by business size is shown in Table 12.

Table 12: Total Scottish turnover of registered private sector businesses for selected SIC codes by employee sizeband (number of employees in business in UK), Scotland, March 2022

Description	£m Turnover by employee sizeband (split by number of employees in businesses in UK)				Total turnover
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Food and Drink Retail	1,517	863	169	13,304	15,853
Non-food retailers	340	398	383	3,993	5,114
Retailers total	1,857	1,261	552	17,297	20,967
Accommodation	129	311	322	517	1,278
Food and drink services	1,085	829	283	1,761	4,050
Out-of-Home total	1,214	1,140	605	2,278	5,328
Total	3,163	2,401	1,157	19,574	26,296

We do not have sufficient data on sales across shops by floor space to consider the potential impact of exemptions by the physical size of stores however the limited evidence available suggests that exempting retail stores below 2000 sq ft in Scotland does not present particular concerns in relation to total population health impact. Annex B uses the data on business sites by the number of employees at each site as a proxy for store size to consider the potential impact, including by SIMD and urban/rural status.

Modelling methods

The next subsections outline the high-level approach to modelling. It begins by describing the approach within each sector: retailers, out of home, manufacturers, government and health. The following section then presents the costs and benefits of each option, along with summaries of Net Present Values over the full policy appraisal period (25 years) of the options.

To estimate labour costs in the Retail and Out of Home sectors, we use job description data from the ASHE dataset and take the average (mean) 2022 hourly wage. All wage costs are up-rated by 30% to reflect non-wage labour costs such as overheads.

Retailers – food and non-food

These businesses include supermarkets and other grocery retailers, as well as non-food retailers. We model the costs as one-off costs (Familiarisation, Product Assessment, Store Planning & Implementation) and recurring costs (Profit reductions).

Familiarisation, product assessment, and store planning & implementation: We differentiate costs in these areas by business size (Micro, 0-9 employees; Small, 10-49 employees; Medium, 50-249 employees; Large, 250+ employees). The primary difference between the food and non-food retailers is the number of products we assume they need to assess, and the complexity of the process to do it.

Micro businesses are assumed to operate at the unit level and receive no back office support with their familiarisation. We therefore assume one shopkeeper per unit, needing time to familiarise themselves with regulations on volume promotion and placement restrictions, carrying out product assessment, and working with a sales assistant to plan and implement any changes to the store layout.

Small businesses are also assumed to have no back office support, however we assume that two managers per unit need to familiarise themselves with the regulations on promotion and placement restrictions. These same two managers then assess products. One manager then works with one retail assistant to plan and reorganise the store.

Medium sized businesses are likely to use more managerial support in understanding product regulations. We therefore assume 2 directors at enterprise level will distribute information to 2 workers per unit. For product assessment, we make assumptions on the ability of medium sized businesses to record product attributes using software. Therefore, we assume the need for director time, a set number of days programming time, stock assessments carried out by staff, and the time taken to disseminate this information to two managers per unit. We further assume that store planning is conducted at both enterprise and unit level, with managers at enterprise level distributing store plans to unit level.

Large businesses, due both to the scale of operations, make more use of enterprise (rather than unit level) staff to approach the policy. We therefore assume that in addition to director and purchasing manager time, programming time is also required in the familiarisation stage to prepare stock management software for updates on which products are restricted. We then assume some time is taken to distribute this information to a limited number of staff at unit level. At the product assessment stage, we include time spent by directors, programmers and stock checkers assessing products. We reduce the time taken to assess a given product as large retailers are likely to already store product nutrition information in their databases so can more quickly flag products that are restricted. This information is then distributed to a small number of staff members per store. For store planning and implementation, we again assume that the majority of work is carried out at enterprise level and then distributed to units.

We assume that there are no capital costs involved with reorganisation as the process is primarily around moving different products into the locations currently occupied by restricted products, rather than having to make physical changes to the locations themselves. Business engagement has highlighted potential costs involved in reconfiguration of store layouts, although the extent to which this would go beyond resource costs (i.e. capital costs of new shelving etc) is unclear. Business are encouraged to provide evidence to support costs associated with store reconfiguration resulting from location restrictions.

These transition costs resource assumptions are summarised in the tables below.

Retailers Transition Costs – Price Promotions

Familiarisation

Table 13: Retail familiarisation costs for price promotions resource assumptions

Store Type	Enterprise Size	Resource Assumptions
Retail – Food and non-food	Micro	No back office process. 90 mins of time for 1 shopkeeper at unit level
	Small	No back office process. 90 mins of time for 2 shopkeepers at unit level.
	Medium	Back office of 2 directors, distributing info to 2 sales assistants per unit. 90 mins of time for 2 directors at enterprise level, 45 mins of time for 2 sales assistants at unit level.
	Large	Back office of half day of directors time, 2 hours of time for 3 purchasing managers, 1 day of programming for two programmers, distributing info to 2 sales assistants per unit with 45 mins of time each.

Product assessment

Table 14: Retail product assessment costs for price promotions resource assumptions

Store Type	Enterprise Size	Resource Assumptions
Retail – Food and non-food	Micro	No back office process, cost at unit level. 5 mins per product, assessed by shopkeeper with no computer system. 500 SKUs (individuals products) as mid-point.
	Small	No back office process, cost at unit level. 5 mins per product, assessed by shopkeeper with no computer system. 500 SKU (individuals products) as mid-point for food, 200 SKU for non-food.
	Medium	Back office of 1 director (half-day), distributing info to 2 sales assistants per unit (1 hour each). 2 stock control clerks checking at enterprise level, 3 mins per product. 5 Days of programming time for food retail, no programming in non-food due to small number of products. 1000 SKUs (individual products) as mid-point for food, 200 SKU for non-food.
	Large	Back office of 2 directors (half-day), distributing info to 2 sales assistants per unit (1 hour each). 2 stock control clerks checking at enterprise level, 2 mins per product. 10 Days of programming time – pre-existing system with full nutritional information which needs development for regulations for food retail, no programming in non-food due to small number of products. 1700 SKUs (individual products) as mid-point for food, 200 SKU for non-food.

Retailers Transition Costs - Location promotions

Familiarisation costs

Familiarisation costs for retail location promotion restrictions are assumed to be equal (but additional) to those of price promotions, with the exception of programming costs for which there are none assumed.

Store planning and implantation costs

Table 15: Retail product assessment costs for location promotions resource assumptions

Store Type	Enterprise Size	Resource Assumptions
Retail – Food and non-food	Micro	No back office process, cost at unit level. Full day of work for proprietor and 1 cashier.
	Small	No back office process, cost at unit level. Full day of work for proprietor and 1 cashier.
	Medium	Back office of 1 manager at enterprise level, 4 days of work. Half day of work for one manager and 1 cashier at unit level.
	Large	Back office of 1 manager at enterprise level, 4 days of work. Half day of work for 1 manager and 2 cashiers at unit level.

The one-off familiarisation costs are made up of the time taken for members of staff to acquaint themselves with the new regulations. The total cost for price and location promotion restrictions combined is shown in Table 16 for both food and non-food retailers. The same staff time requirements are used to estimate the costs for both price and location restrictions, with the exception of programmer costs which are excluded from location promotions.

Table 16: Retail familiarisation costs of price and location promotion restrictions, non-recurring (£2022)

	Lower		Central		Upper
	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	335,631	71	503,447	106	667,608	141
Micro	184,428	44	276,642	66	368,856	88
Small	57,116	120	85,674	180	114,232	240
Medium	10,315	295	15,472	442	20,630	589
Large	83,772	3,351	125,659	5,026	163,890	6,556
Retail - Non food	106,545	113	159,818	170	210,749	224
Micro	34,880	44	52,320	66	69,760	88
Small	12,644	126	18,966	190	25,288	253
Medium	3,212	214	4,818	321	6,424	428
Large	55,809	1,860	83,714	2,790	109,277	3,643
Retail - Total	442,176	78	663,265	117	878,357	155

Overall costs are skewed towards micro and small businesses, reflecting that there are significantly more businesses in these size categories. However, costs are significantly higher for large business on average.

The one-off costs of product assessment are shown in Table 17. As the products under the regulations are the same for price and location restrictions, we estimate only one set of costs across both promotion restrictions.

Table 17: Retail product assessment costs of price and location promotion restrictions, non-recurring (£2022)

	Lower		Central		Upper
	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	3,056,355	646	4,928,835	1,042	6,844,755	1,447
Micro	2,305,350	550	3,842,250	916	5,379,150	1,282
Small	356,975	752	594,958	1,253	832,942	1,754
Medium	90,418	2,583	115,473	3,299	140,443	4,013
Large	303,612	12,144	376,154	15,046	492,220	19,689
Retail - Non food	301,624	321	390,291	415	478,957	510
Micro	218,000	276	290,667	368	363,333	460
Small	39,513	395	52,683	527	65,854	659
Medium	5,171	345	5,824	388	6,476	432
Large	38,941	1,298	41,117	1,371	43,293	1,443
Retail - Total	3,357,979	592	5,319,126	938	7,323,712	1,292

Product assessment costs are estimated to be significantly higher than familiarisation costs overall, reflecting the time required for retailers to consider each product they stock and whether it meets the criteria as a restricted product.

For food retailers, we assume that micro and small businesses will be required to assess between 300 and 700 products across the scenarios, while medium size businesses will assess between 600 and 1,400 products and large companies between 12,000 and 25,000 products.

While larger food retailers will stock a larger range of products and therefore have a higher product assessment cost on average, the overall costs again reflect the much larger share of micro and small businesses.

The lower product assessment costs for non-food retailers compared to food retailers, relative to familiarisation costs, reflects that on average they will have a smaller range of targeted products for sale and the time taken to assess the products will therefore be lower. We assume a range of between 150 and 250 products requiring assessment across all business sizes.

The restriction of location promotions will also require the one-off adjustment of store layouts as stock is moved to meet the regulations. Given the lack of information on potential capital costs involved, this again is estimated through staff time required to undertake the required tasks. See Table 18.

Table 18: Retail store planning and implementation costs for location promotion restrictions, non-recurring (£2022)

	Lower		Central		Upper
	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	975,177	206	1,950,354	412	2,925,532	619
Micro	615,888	147	1,231,776	294	1,847,664	440
Small	95,368	201	190,736	402	286,104	602
Medium	31,573	902	63,146	1,804	94,718	2,706
Large	232,348	9,294	464,697	18,588	697,045	27,882
Retail - Non food	271,636	289	543,271	578	814,907	867
Micro	116,480	147	232,960	295	349,440	442
Small	21,112	211	42,224	422	63,336	633
Medium	11,784	786	23,568	1,571	35,352	2,357
Large	122,260	4,075	244,519	8,151	366,779	12,226
Retail - Total	1,246,813	220	2,493,626	440	3,740,438	660

Table 19 combines the familiarisation, product assessment and planning and implementation costs to present the overall transition costs for retail businesses. This is presented for both overall costs and on an average cost per business split by business size.

Table 19: Retail overall transition costs for price and location promotion restrictions, non-recurring (£2022)

	Lower		Central		Upper
	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	4,367,163	923	7,382,636	1,561	10,437,895	2,207
Micro	3,105,666	740	5,350,668	1,275	7,595,670	1,811
Small	509,459	1,073	871,368	1,834	1,233,278	2,596
Medium	132,305	3,780	194,091	5,545	255,791	7,308
Large	619,733	24,789	966,509	38,660	1,353,156	54,126
Retail - Non food	679,805	723	1,093,380	1,163	1,504,613	1,601
Micro	369,360	468	575,947	729	782,533	991
Small	73,269	733	113,873	1,139	154,478	1,545
Medium	20,167	1,344	34,210	2,281	48,252	3,217
Large	217,010	7,234	369,350	12,312	519,349	17,312
Retail - Total	5,046,968	890	8,476,016	1,495	11,942,508	2,106

Retailers profit reductions - Price promotions

Expenditure change of targeted food groups from price promotions

The economic modelling carried out by the SRUC/University of Aberdeen models the change in expenditure by food categories as a result of the removal of promotions on discretionary goods^[34]. These figures are presented per capita and using 2018 prices for take-home food and drink expenditure. The per capita figures are updated into 2022 prices using the latest available estimate of total take-home food and drink expenditure, £10.5 billion in 2022^[35]. Using the latest estimate of Scotland’s population of 5.4 million^[36] we can estimate the total fall in expenditure across the different take-home food categories. See Table 20.

Table 20: Modelled expenditure change on discretionary take-home food and drink (uprated into 2022 prices), £million

	2022 expenditure (£m)	Impact of restricting price promotions on sales (£m)
		Multi-buy	All price promotions
Take home confectionery	£504.0	-£14.99	-£82.23
Biscuits	£231.0	-£15.18	-£57.16
Take home savouries	£304.5	-£15.97	-£42.58
Cakes, pastries and sugar morning goods	£315.0	-£11.75	-£40.56
Total puddings and desserts	£126.0	-£9.51	-£26.86
Take home sugary drinks	£630.0	-£25.17	-£62.31
Edible ices and ice cream	£115.5	-£10.80	-£32.89

The economic modelling undertaken by SRUC/University of Aberdeen for the Scottish Government was based on the removal of price promotions from discretionary foods. It did not model the impacts on removing promotions from the additional foods now under consideration, such as ready meals.

We have therefore had to estimate the potential impact on the additional foods under consideration based on other available information, but recognise it will be subject to greater uncertainties due to this.

Table 21: Share of food categories spend on promotion and share failing NPM

Food category	% spend on promotion (2022)[37]	% spend on multibuy and Y for £X (2022)	% of total grocery spend (2022)	% NPM test fail[38]
Sweet biscuits	26.7	2.1	2.2	99
Total confectionery	29.5	3.9	4.8	99[39]
Cakes & pastries + higher fat/sugar morning goods	20.2	5	3	100
Crisps & savoury snacks	30.7	4.7	2.9	95
Puddings & desserts	27	4.9	1.2	66
Ice cream & edible ices (excl. frozen dairy desserts)	40	7.6	1.1	98
Regular soft drinks (excl. water)	32	9.2	6	78.3[40]
Breakfast cereals	30.1	8.5	1.4	59[41]
Ready meals	31.1	17.5	3.6	18
Yoghurt & fromage frais	37.4	8.5	1.5	18
Pizza	30.2	3.9	1.2	73
Roast and processed potatoes	25.1	4.2	0.9	4

To estimate the change in expenditure on additional foods under consideration (i.e. ready meals, cereals, pizza, etc) we base it on the changes in discretionary food and the share of discretionary and additional foods which are sold via promotion. In more detail:

1. We calculate the average modelled change in expenditure on discretionary foods from the economic modelling (i.e. change as a share of the total expenditure for each category).

2. We then calculate the share of additional foods which are sold on promotion (average of ready meals, cereals, pizza and roast and processed potatoes sold under multi-buy and TPRs), which fail a NPM test.

3. Similarly, we calculate the average share of discretionary foods on promotion and fail a NPM test.

4. We then calculate the ratio of (2) and (3) above, and apply this to the average change in discretionary foods (from (1)), to give us the estimated percentage change in additional foods under multi-buy and all price promotions.

5. We then apply this figure to the estimated total expenditure on additional food categories to give us the estimated change resulting from the restrictions on promotions for multi-buys and all price promotions.

Table 22: Estimated expenditure change on take-home additional foods (i.e. ready meals) (uprated into 2022 prices), £million

		Impact of restricting price promotions (£m)
	2022 expenditure (£m)	Multi-buy	All price promotions
Additional foods (i.e. ready meals)	£903.0	£31.1	£56.8

Expenditure change in non-targeted food and drink as a result of price promotions restrictions (substitution)

Restricting price promotions will reduce spending on HFSS foods which fall under the regulations. However, we assume this will be accompanied by a substitution towards spending on other foods which are not targeted. In the SRUC economic modelling, the ratio of expenditure falls on discretionary foods to increases in other non-targeted foods is -1.064 to 0.973, or 91%. While this was modelling based on discretionary foods only, we assume this expenditure substitution ratio also holds for the additional foods.

Change in retailer profits from price promotion restrictions (recurring costs)

The net change in retail expenditure is estimated using the estimated reduction in expenditure on targeted foods netted against the gains in expenditure from substitution of non-targeted food, using the 91% substitution ratio. The change in annual retailer profits are then estimated using an assumed profit margin of 4% in the central scenario (2% in lower, 6% in upper). The results for discretionary foods only are shown in Table 23 for the case in which only multi-buy price promotions are restricted. These are recurring costs which are assumed to be incurred annually.

Table 23: Change in retailer profits from price promotions (multi-buy only) on discretionary foods, £2022 (recurring costs)

			Change in profits
Category	Revenues	Change in expenditure	Lower	Central	Upper
Biscuits	231,000,000	(15,175,628)	(303,513)	(607,025)	(910,538)
Confectionery	504,000,000	(14,991,595)	(299,832)	(599,664)	(899,496)
Cakes	315,000,000	(11,745,171)	(234,903)	(469,807)	(704,710)
Savoury snacks	304,500,000	(15,968,569)	(319,371)	(638,743)	(958,114)
Pudding	126,000,000	(9,506,134)	(190,123)	(380,245)	(570,368)
Ice cream	115,500,000	(10,800,945)	(216,019)	(432,038)	(648,057)
Soft drinks	630,000,000	(25,172,048)	(503,441)	(1,006,882)	(1,510,323)
Total targeted products	2,226,000,000	(103,360,090)	(2,067,202)	(4,134,404)	(6,201,605)
Gains from substitution		94,520,083	1,890,402	3,780,803	5,671,205
Profit net change		(8,840,008)	(176,800)	(353,600)	(530,400)

Including additional foods such as ready meals in the price promotion (multi-buy only) regulations increases the estimated decrease in annual retail profits, but not by the same share as expenditure on additional products due to the lower share of these products failing NPM test. See Table 24.

Table 24 : Change in retailer profits from price promotions (multi-buy only) on discretionary and additional foods, £2022 (recurring costs)

			Change in profits
Category	Revenues	Change in expenditure	Lower	Central	Upper
Biscuits	231,000,000	(15,175,628)	(303,513)	(607,025)	(910,538)
Confectionery	504,000,000	(14,991,595)	(299,832)	(599,664)	(899,496)
Cakes	315,000,000	(11,745,171)	(234,903)	(469,807)	(704,710)
Savoury snacks	304,500,000	(15,968,569)	(319,371)	(638,743)	(958,114)
Pudding	126,000,000	(9,506,134)	(190,123)	(380,245)	(570,368)
Ice cream	115,500,000	(10,800,945)	(216,019)	(432,038)	(648,057)
Soft drinks	630,000,000	(25,172,048)	(503,441)	(1,006,882)	(1,510,323)
Additional foods (i.e. ready meals)	903,000,000	(31,067,547)	(621,351)	(1,242,702)	(1,864,053)
Total targeted products	3,129,000,000	(134,427,637)	(2,688,553)	(5,377,105)	(8,065,658)
Gains from substitution		122,930,537	2,458,611	4,917,221	7,375,832
Profit net change		(11,497,101)	(229,942)	(459,884)	(689,826)

Extending the price promotion restrictions to cover all price promotions (e.g. Temporary Price Reductions) leads to a significant increase in estimated annual lost profits to retailers. See Table 25.

Table 25: Change in retailer profits from price promotions (all price promotions) on discretionary and additional foods, £2022 (recurring costs)

			Change in profits
Category	Revenues	Change in expenditure	Lower	Central	Upper
Biscuits	231,000,000	(57,162,180)	(1,143,244)	(2,286,487)	(3,429,731)
Confectionery	504,000,000	(82,226,909)	(1,644,538)	(3,289,076)	(4,933,615)
Cakes	315,000,000	(40,557,855)	(811,157)	(1,622,314)	(2,433,471)
Savoury snacks	304,500,000	(42,578,660)	(851,573)	(1,703,146)	(2,554,720)
Pudding	126,000,000	(26,856,150)	(537,123)	(1,074,246)	(1,611,369)
Ice cream	115,500,000	(32,894,981)	(657,900)	(1,315,799)	(1,973,699)
Soft drinks	630,000,000	(62,310,881)	(1,246,218)	(2,492,435)	(3,738,653)
Ready meals	903,000,000	(56,786,860)	(1,135,737)	(2,271,474)	(3,407,212)
Total targeted products	3,129,000,000	(401,374,476)	(8,027,490)	(16,054,979)	(24,082,469)
Gains from substitution		367,046,396	7,340,928	14,681,856	22,022,784
Profit net change		(34,328,080)	(686,562)	(1,373,123)	(2,059,685)

Retailers profit reductions - Location promotions

Lastly, we estimate the change in sales from location promotions by assigning targeted products categories to those that are sold from either i) checkouts, ii) the end-of-aisle, iii) both. The share of sales which are currently via checkout locations is assumed to be 7.1%, and 20% of sales are assumed to come from other promotional locations.^[42] The estimates for aisle promotion locations are used as a proxy for all non-checkout locations, such as display bins and store entrances for which there is limited specific estimates.

Table 26: Assessment of potential location of HFSS foods

	Promotion location
Category	Aisle: front / end	Checkout
Biscuits	Yes	No
Confectionery	Yes	Yes
Cakes	Yes	Yes
Savoury snack	Yes	Yes
Pudding	Yes	No
Ice cream	Yes	Yes
Soft drinks	Yes	No
Ready meals	Yes	No

For checkout promotions, a number of large retailers have committed to voluntary restrictions on the placement of HFSS foods at checkouts. This is estimated to be 15.7% of total potential checkout sales of HFSS foods based on a search of public statements from retailers on voluntary actions and their accompanying market share (of all groceries). To note, this was carried out prior to restrictions on location promotions being implemented in England, and as such the figure may have increased if shops complying with English regulations apply any updated placement strategies to all UK stores.

Applying these estimates to the total expenditure on each food category provides an estimate of the total revenue of products in scope (i.e. sales from checkout or aisle locations not already voluntary restricted). See Table 28 for total estimated value of products in scope of location restrictions.

An assessment is then made of the impact on retail sales and profits of moving restricted products out of targeted locations, and them being replaced by non-targeted products. There are a number of studies which examine the impact of product location on sales^[43][44][45]. These studies follow different methodology, food types and geography, and as such arrive at a range of results on the impact of location. We use this range of results to estimate the potential impact of location restrictions on sales uplifts across our different scenarios. See Table 27.

Table 27: Estimated uplift in sales from product location

Store Location	Estimated sales uplift
	Lower	Central	Upper
Aisle: Front / end	20%	30%	53%
Checkout	0%	18%	25%

Profit margins of 2%, 4%, and 6% are assumed for the lower, central and upper scenarios respectively. This is assumed to be the same across all types of foods and location placement. As discussed in the UK Government impact assessment on location promotion restrictions^[46], it may be the case that profit margins are higher for confectionary products etc. However, to avoid potential double counting our approach is restricted to considering the total lost uplift in sales, with the overall impact factoring in the substitution to non-HFSS products which move into the restricted locations.

The total estimated reduction on annual retailer profits is shown in Table 28. This is split between discretionary foods only, and also discretionary and additional foods, as well as estimating the impacts of exempting businesses with less than 50 employees.

Table 28 : Estimated reduction in retailer profits from location promotion restrictions, £2022 (recurring costs)

Foods in Scope	Description	Lower	Central	Upper
Discretionary only	Products in scope	417,211,788	417,211,788	417,211,788
	Lost uplift	67,385,500	95,270,612	142,635,895
	Net of compensatory behaviour	5,763,234	8,148,144	12,199,123
	Lost profit	115,265	325,926	731,947
	Lost profit (micro/small exempt)	98,124	271,756	611,887
Discretionary + additional	Products in scope	479,338,188	479,338,188	479,338,188
	Lost uplift	77,739,900	109,607,473	164,156,805
	Net of compensatory behaviour	6,648,807	9,374,323	14,039,727
	Lost profit	132,976	374,973	842,384
	Lost profit (micro/small exempt)	113,201	313,509	705,900

Out of Home Sector

The Out of Home (OoH) sector comprises restaurants, takeaways, event catering, pubs and hotels. We assume the structure of costs is similar to those incurred by retailers. We therefore separate costs into familiarisation, product assessment, store planning and adjustment, and reductions in profits.

We again separate the one-off implementation costs by business size. Micro and small businesses only incur costs at the unit level; medium and large businesses incur some costs at unit level, but also have costs at enterprise level.

For familiarisation, we expect micro businesses to need one owner taking between 1 and 2 hours to understand the new regulations on volume/price promotions, and a further 1 to 2 hours to familiarise themselves with location restrictions. Due to a lower number of products to assess at the smaller businesses, it will take around 1 to 3 hours to assess products.

At medium businesses, we assume it takes two directors at enterprise level between one and two hours to familiarise themselves with volume/price promotion regulations, then between half an hour and an hour to disseminate the information to two managers at each unit. This is repeated for location regulations. We only expect products to be assessed at the unit level, using the time of a manager.

Large businesses need time for purchasing managers, and general managers to understand both the volume/price and location regulations and time to disseminate the information. Again, product assessment is carried out at unit level.

These transition costs resource assumptions are summarised in the tables below.

Out of Home Transition Costs - Price promotions

Familiarisation costs

Table 29: OoH familiarisation costs for price promotions resource assumptions

Store Type	Enterprise Size	Resource Assumptions
Out of home	Micro	No back office process, cost at unit level. One manager for 90 mins.
	Small	No back office process, cost at unit level. 2 Managers for 90 mins each.
	Medium	Back office of 2 directors (90 mins each), distributing information to 2 managers per unit (2 hours each).
	Large	Back office of 1 director (half-day), and 3 managers (2 hours each) at enterprise level. 2 Managers per unit (2 hours each)

Product assessment costs

Table 30: OoH product assessment costs for price promotions resource assumptions

Store Type	Enterprise Size	Resource Assumptions
Out of home	Micro	No back office process, cost at unit level. One manager for 100 mins
	Small	No back office process, cost at unit level. One manager for 100 mins
	Medium	No back office process, cost at unit level. One manager for 100 mins
	Large	No back office process, cost at unit level. One manager for 150 mins

Out of Home Transition Costs - Location promotions

Familiarisation costs

Familiarisation costs for OoH location promotion restrictions are assumed to be equal (but additional) to those of price promotions.

Product assessment costs

Product assessment costs are only required once, and cost estimates have already been calculated for price promotions. These will not need to be duplicated if both price and location restrictions are in place as product assessment is only required once.

Store planning and adjustment

Table 31: OoH store planning and adjustment costs for location promotions resource assumptions

Store Type	Enterprise Size	Resource Assumptions
Out-of-home	Micro	No back office process, cost at unit level. One manager for 1 day.
	Small	No back office process, cost at unit level. One manager for 1 day, shop assistant for half a day.
	Medium	Back office process of one managers for 2 days, at enterprise level. One manager for 1 day, shop assistant for half a day at unit level.
	Large	Back office process of one managers for 2 days, at enterprise level. One manager for 1 day, shop assistant for half a day at unit level.

We are not aware of any comprehensive data on the scale and impact of price and volume promotions in the OoH sector in Scotland which would allow us to produce robust estimates of the potential reduction in sales and profits from the introduction of such promotion restrictions. This is in line with the UK Government Impact Assessment, which was unable to cost the impact of restricting volume promotions on the OoH sector.

To estimate reductions in profits in this sector, we therefore only estimate the losses from the location restrictions. The lost profits from location restrictions are estimated from UK-level data for illustrative purposes. We take the estimated OoH market value from Kantar, and apply the proportion of sales through checkouts and other restricted locations in retail environments. We then define what proportions of sales are from shops in scope, and apply a profit margin to estimate lost profits. Lastly we assume that some lost sales are replaced by new (unrestricted) products in the same space, leading to some offsetting.

Location promotions restrictions in the OoH are expected to principally impact the food-to-go market. The analysis on potential reductions in OoH profits is therefore restricted to this segment of the market, which is estimated to be around 17% of the total OoH sector revenue. This is based on data provided by FSS on the share of OoH sales by channel in 2020, in which 17.2% of sales are estimated to be through bakery and sandwich shops and convenience, which we treat as the food-to-go section of the market for the purposes of this analysis.

The total size of the OoH market is estimated to be around £4 billion in 2022 prices. This is based on an estimate of £3.6 billion^[47] uprated by the level of food inflation between 2021 and 2022 of 12.4%. The estimated size of the food-to-go market is therefore just under £700 million (i.e. 17% of the total OoH).

Estimates of the reduction in profit are based on assumptions that HFSS products sold in the OoH sector have a larger profit margin than non-restricted foods (31.5%^[48] compared to 12.4%), and that currently all sales in locations within the scope of the restrictions (7.1% of sales based on checkout assumption) are comprised of HFSS foods. It is also assumed that after HFSS goods are relocated to non-restricted areas, 30% of their original sales are retained as per the UK Government impact assessment.^[49]

The share of food sales within scope of the restrictions is adjusted by the percentage of products by value which would be included within the restrictions (i.e. 17% discretionary foods, raising to 25% when including additional foods such as ready meals), and by the share of turnover from exempt businesses (businesses with less than 50 employees) of 42% for relevant options.

The estimated net decrease in profits for the OoH sector (for central scenario) from the location promotion restrictions is shown in Table 32. These are assumed to be recurring annual costs.

Table 32: Estimated reduction in OoH profits from location promotion restrictions, £2022 (recurring)

	Discretionary foods only	Discretionary plus additional foods	Discretionary plus additional foods with exemption for micro/small businesses
Checkout sales of HFSS food (£)	6,303,607	7,680,544	4,418,891
HFSS profit margin	31.5%	31.5%	31.5%
Potential lost profits (£)	1,985,636	2,419,371	1,391,951
Non-HFSS profit margin	12.4%	12.4%	12.4%
Profit from substitutes (£)	781,647	952,387	547,942
Net loss after substitution (£)	1,203,989	1,466,984	844,008
Retained sales from HFSS after reallocation	30%	30%	30%
Additional revenue from retained sales (£)	1,891,082	2,304,163	1,325,667
Profit from retained HFSS (£)	595,691	725,811	417,585
Lost profit from non-HFSS (£)	234,494	285,716	164,383
Net additional profit after substitution (£)	361,197	440,095	253,202
Net total lost profit (£), annual	842,792	1,026,889	590,806

Manufacturing

To estimate the impact on Scottish manufacturers, we take estimated lost sales from retailers and OoH as a result of the promotion restriction as an input. By applying an assumed retailer mark-up to sales lost, we estimate lost sales to manufacturers. This is done separately for location and price promotion restrictions. We then assume a profit margin to manufacturers, and what proportion of manufacturer profits are retained in the UK.

It is assumed that there are no product reformulation costs from manufacturers. This is on the basis that manufacturers would only decide to undertake a reformulation if it was more profitable for them to do so than not. Therefore any costs in reformulation would be offset by increased profits – or in the context of this assessment lower recurring lost profits.

The central case estimates for the main combinations of restrictions is shown in Table 33 along with the key assumptions used around mark-up rates, profit margins, and profit retention.

Table 33: Estimated change in manufacturer profits from promotion restrictions (central case estimates for different combinations of targeted foods and price promotion), £2022

Promotions		Multi-buy + Location		All price promotions[50] + Location
Targeted foods		Discretionary	Discretionary plus additional
Change in sales in retail and OOH	HFSS	(203,043,227)	(249,411,491)	(516,358,330)
	Non-HFSS	185,677,687	228,080,245	472,196,105
		53% UK supermarket mark-up
Value of manufacturer sales	HFSS	(133,143,099)	(163,548,519)	(338,595,626)
	Non-HFSS	109,838,125	135,813,785	295,889,758
		6% Food and drink producers profit margin
Change in manufacturing profits	HFSS	(5,988,387)	(7,505,694)	(18,008,521)
	Non-HFSS	5,125,841	6,459,597	16,064,155
		49% of profits retained in Scotland
Manufacturer profits retained in Scotland	HFSS	(3,914,407)	(4,808,326)	(9,954,711)
	Non-HFSS	2,511,662	3,165,203	7,871,436
Net change in manufacturer profits		(1,402,745)	(1,643,124)	(2,083,275)

Government Enforcement Costs

In line with the Verity House Agreement we continue to work with local government, FSS and enforcement professionals to help inform estimates and costing implication to local authorities Costing and funding scenarios will be kept under review and updated prior to publication of the final BRIA.

This section estimates the costs to local authorities in enforcing the regulations and providing support to businesses upon their introduction.

Enforcement scenarios

The potential cost will vary depending on the enforcement scenario used by local authorities. The modelling sets out potential costs under the three enforcement scenarios to present an illustrative range of costs which may be incurred by local authorities. These scenarios are:

• High resource/assurance – Verification and validation: This approach would assume that enforcement officers are visiting premises to verify that restrictions are being followed. In addition, it assumes that validation is being performed to ensure that non-HFSS status of products are being accurately calculated.
• Medium resource/assurance – Verification only: This approach assumes that enforcement officers are visiting premises to verify that restrictions are being followed however without the additional verification requirements of the option above. This option differs only in approach, not in locations visited or frequency of visits.
• Low resource/assurance – Verification only of high risk businesses (Reactive approach): This approach is consistent with the medium assurance approach with the difference being that inspections are not carried out as standard but based on the anticipated risk of non-compliance. We are assuming that only 5% of businesses fall into this category, and that longer inspection times would be required due to the greater perceived risk of non-compliance. This risk based approach is consistent with the principle to target enforcement where there is the most need.

Employment costs

The estimated costs are primarily based on estimates of additional time taken by staff to undertake the new responsibilities. This time is costed using data on hourly wages, uprated to reflect non-pay employment costs.

It is for Scottish local authorities to determine the most appropriate way to allocate resources to support the enforcement of regulations.

The average wages for both Trading Standard Officers (TSOs) and Environmental Health Officers (EHOs) is taken from ONS regional hourly wage data by occupation. As noted below, salary data provided on TSO wages by Scottish Local Authorities is significantly different from the ONS estimate for “Inspectors of standards”, the latter of which is therefore excluded from the analysis.

The most recent official regional wage data from the ONS at the required occupational level does not include figures for Scotland for 2022 for both TSOs and EHOs. 2021 figures have therefore been used and uprated into 2022 prices using Consumer Price Index (CPI) for the 12 months to June 2022 of 9%. Hourly wages are uprated by 30% to account for non-wage labour costs, giving an estimated hourly cost per TSO and EHO.

Table 34: Hourly pay – Excluding overtime (£) – 2021 figures uprated into 2022 prices using CPI^[51]

Region	Description	Code	Median pay	Mean pay
Scotland	Environmental health professionals	2483	20.56	22.05
Scotland	Inspectors of standards and regulations	3581	16.22	19.26
Uprated wage to account for non-wage labour costs		Adjustment	Median pay	Mean pay
Scotland	Environmental health professionals	30%	26.73	28.67
Scotland	Inspectors of standards and regulations	30%	21.09	25.04
Uprated by CPI to put into 2022 prices		CPI*	Median pay	Mean pay
Scotland	Environmental health professionals	9%	29.24	31.36
Scotland	Inspectors of standards and regulations	9%	23.07	27.39

*CPI 12 Months to June 2022

Members of the Financial Considerations and Delivery Group supporting the policy development provided the Scottish Government with results from surveys of salary information of EHO and TSOs across Scottish Local Authorities (LA):

• For EHOs in 2022, the mid-point wage from the local pay-scale was provided by 31 of the 32 Local Authorities. The mean hourly wage was £20.42 and the median hourly wage was £20.49.
• For TSOs, £21.86 was the average of the minimum and maximum salary points for 2022/23 salaries across 26 of the 32 Local Authorities supplying data.

For the purposes of this analysis the ONS pay figures have been used to allow consistency across different occupations in other elements of the assessment. Given the significant difference between the ONS figures for inspectors of standards and the salary ranges of TSOs we exclude the ONS figure from this analysis and use the higher hourly time cost of EHOs. We recognise in practice the deployment of resources will be a decision made by Local Authorities and could be a combination of different inspectors.

Familiarisation costs

There will be a cost to Local Authorities of familiarisation with the new regulations, training officers, the dissemination of guidance, and administration costs.

• Staff training/familiarisation with new requirements – It is estimated that there would be a slight reduction in training required should the low resource/assurance enforcement scenario be followed.
• Administration - supporting business implementation – It is anticipated that businesses may contact their relevant Local Authorities during the implementation period to these requirements coming into force for advice on how to implement restrictions.
• Administration - un-paid fines – where fines relating to offences for breach of these policies go unpaid, should the fines be over £200 in value then the Local Authority finance departments would make efforts to pursue payment. This is based on feedback from the Financial and Delivery Considerations Group.
• Other Administrative resource – this would include tasks such as responding to FOIs in relation to enforcement action, communications with businesses, and potential reporting in relation to enforcement action/levels of compliance.

We assume that the administration costs would be the same regardless of the enforcement scenario as the underlying requirements out with physical inspections should remain similar, and would be the equivalent of one FTE for one month per local authority. This is equivalent to 163 hours of work for each local authority.

The estimated training times per officer are based on feedback from Food Standards Scotland based on current enforcement regimes. These are assumed to equate to 2 hours per officer if employing a low resource/assurance enforcement scenario, rising to 5 hours per officer if employing a high or medium resource/assurance scenario. This is multiplied by the latest available estimate of the total number of EHOs of 202 as of November 2021^[52]. It is assumed these costs would be the same regardless of exemptions to the policy by business or store size or type.

The time and cost estimates for this training and administration is shown in Table 35. These are assumed to be one-off costs incurred in the first year only.

Table 35: Familiarisation costs, one-off training and administration costs in year 1 (2022 prices)

		Enforcement scenario
		Low Resource / Assurance	Medium Resource / Assurance	High Resource / Assurance
Training	Per officer	2	5	5
	Total hours	404	1,010	1,010
	Total cost	£12,669	£31,673	£31,673
Administration	Per LA	163	163	163
	Total hours	5,216	5,216	5,216
	Total cost	£163,571	£163,571	£163,571
Total	Hours	5,620	6,226	6,226
	Cost	£176,240	£195,244	£195,244

Inspection frequency and additional time

Inspections of retail and OoH premises are already conducted through the standard operations of inspecting trading standards and environmental health. The additional cost of inspection in relation to the new regulations is therefore estimated as the additional time spent during each visit, rather than calculating the time and costs of an entire intervention including travel time etc.

This estimated time varies for the three different enforcement scenarios, given the different inspection requirements. The additional times are estimated to be separate for the inspection of both price and location promotion restrictions.

For example, if under the high resource / assurance enforcement scenarios it would require an additional 30 mins for each of price and location promotions restrictions to be added to existing inspections for the relevant locations to validate that requirements were being followed then additional resource should be calculated on this basis. Table 36 shows the additional time requirements across the enforcement scenarios.

Table 36: Time requirements for inspections for promotion type, additional time per existing visits (hours)

	Enforcement Scenario
	Low Resource / Assurance	Medium Resource / Assurance	High Resource / Assurance
Price	1	0.25	0.5
Location	1	0.25	0.5

In line with the UK Government impact assessments on HFSS promotion restrictions, the following assumptions are made regarding the frequency of inspections:

• Retail units are inspected once every 3.5 years
• Out-of-home units are inspected once every 2 years

The inspection rate is assumed to be 100% of eligible units for both the medium resource / assurance and high resource / assurance scenario. For the low resource /assurance scenario it is assumed that only 5% of premises would fall in the high-risk category of premises which would require inspection under this more targeted approach.

Number of business sites within scope of regulations

The number of business sites in Scotland - i.e. individual stores - which will potentially be within scope of the regulations and potentially subject to inspections is shown in

Table 37. This totals over 25,000 across retailers and out-of-home businesses. A breakdown is given of the split of business sites by the overall size of the business (number of employees in the UK) for the purposes of considering the impact of exempting businesses by size.

 

Table 37 : Number of business sites of registered private sector businesses in Scotland by number of employees in business in UK, 2022

Description	Number of business sites in Scotland (split by number of employees in businesses in UK)				Total number of business sites
	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)
Food and Drink Retail	4,230	655	240	2,110	7,230
Non-food retailers	800	145	80	1,050	2,080
Retailers total	5,030	800	320	3,160	9,310
Accommodation	850	650	205	275	1,980
Food and drink services	9,045	2,490	365	2,105	14,010
Out-of-Home total	9,895	3,140	570	2,380	15,990
Total	14,920	3,945	890	5,540	25,300

Source: IDBR extract for relevant 5 digit SIC codes

Total annual inspection costs

Using the inspection rate and frequency of visits we can estimate the total number of units inspected annually under each of the enforcement scenarios. Applying the time per visit to this then allows us to estimate the potential annual inspections costs. These totals costs are shown in Table 38, Table 39, and Table 40 including the estimates if micro and small businesses (less than 50 employees) are exempt from the regulations (based on the total number of employees in the business).

Table 38: Total annual inspection costs, Low Resource / Assurance scenario, 2022 prices

		Low Resource / Assurance
	Businesses within scope	Retail	OOH	Total
Inspection rate		5%	5%
Frequency of visits (per year)		0.29	0.5
Time per visit, hours		2	2
Units inspected annually	All Businesses	135	400	535
	Micro/Small exempt	50	74	124
Annual cost	All Businesses	£8,467	£25,072	£33,539
	Micro/Small exempt	£3,165	£4,626	£7,790

Table 39: Total annual inspection costs, Medium Resource / Assurance scenario, 2022 prices

		Medium Resource / Assurance
	Businesses within scope	Retail	OOH	Total
Inspection rate		100%	100%
Frequency of visits (per year)		0.29	0.5
Time per visit, hours		0.5	0.5
Units inspected annually	All Businesses	2,700	7,995	10,695
	Micro/Small exempt	1,009	1,475	2,484
Annual cost	All Businesses	£42,334	£125,360	£167,693
	Micro/Small exempt	£15,824	£23,128	£38,952

Table 40: Total annual inspection costs High Resource / Assurance scenario, 2022 prices

		High Resource / Assurance
	Businesses within scope	Retail	OOH	Total
Inspection rate		100%	100%
Frequency of visits (per year)		0.29	0.5
Time per visit, hours		1	1
Units inspected annually	All Businesses	2,700	7,995	10,695
	Micro/Small exempt	1,009	1,475	2,484
Annual cost	All Businesses	£84,668	£250,719	£335,387
	Micro/Small exempt	£31,648	£46,255	£77,903

Reconfiguration support

In addition to the inspection costs, it is expected that there may be one-off costs in providing businesses with support on how to reconfigure premises and general advice on adhering to the new regulations.

It is challenging to estimate what level of resource may be required to perform this support. For the purposes of this analysis we have assumed that there would be a one-off cost in the first year to support with reconfiguration which is equal to the estimated annual inspection costs for each enforcement scenario. See Table 41.

Table 41 : Reconfiguration and adoption support, one-off cost in year 1 (£2022)

	Enforcement style
	Low Resource / Assurance				Medium Resource / Assurance				High Resource / Assurance
Businesses within scope	Retail	OOH	Total	Retail		OOH	Total	Retail		OOH	Total
All	8,467	25,072	33,539	42,334		125,360	167,693	84,668		250,719	335,387
Micro/Small exempt	3,165	4,626	7,790	15,824		23,128	38,952	31,648		46,255	77,903

Annual overheads

While the expectation is that the new regulations will be encompassed into the standard inspection and enforcement regimes, there will likely be additional administration costs and general overheads associated with the responsibilities beyond the inspection time requirements. This would also include any additional time and travel costs for inspections and engagement. These would be ongoing annual costs going forward.

We have estimated these additional costs on the basis of a share of an FTE in each Local Authority. We have assumed that 5% of an FTE in each Local Authority would be required in the low resource / assurance enforcement scenario, and that overheads would be double that at 10% of an FTE in a medium resource / assurance and high resource / assurance enforcement scenario. Totalled across the 32 local authorities gives an estimate of the total FTE in Scotland, which is then multiplied by the EHO wage costs to give an annual estimate of overheads. See Table 42.

Table 42 : Estimated annual administration and overhead costs (£2022)

	Enforcement scenario
	Low resource / assurance	Medium resource / assurance	High resource / assurance
Overhead (FTE)	5%	10%	10%
Total time (FTE)	1.6	3.2	3.2
Total cost	£82,789	£165,578	£165,578

Total enforcement costs

The estimated costs above are summarised in Table 43 to provide estimated total enforcement costs over the next 25 years. The annual costs are discounted using the recommend social discount rate of 3.5%.

The total estimated costs over the 25 year period with no exemptions range between £2.2 million and £9 million depending on the enforcement scenario. When exempting businesses with less than 50 employees, the estimated costs over the period range between £1.7 million and £4.4 million.

Table 43: Estimated total enforcement costs over 25 year, no exemptions £2022 (discounted)

		All businesses
		Low resource /assurance	Medium resource /assurance	High resource /assurance
Year 0 (first year)	Familiarisation	£176,240	£195,244	£195,244
	Inspections	£33,539	£167,693	£335,387
	Reconfiguration	£33,539	£167,693	£335,387
	Overheads	£82,789	£165,578	£165,578
	Total	£326,107	£696,209	£1,031,596
Years 1-25 (next 24 years)	Inspections (undiscounted)	£804,928	£4,024,642	£8,049,284
	Overheads (undiscounted)	£1,986,939	£3,973,877	£3,973,877
	Total (discounted)	£1,868,034	£5,351,798	£8,044,681
Total over 25 years(discounted)		£2,194,141	£6,048,008	£9,076,277

Table 44: Estimated total enforcement costs over 25 year, exemptions for micro and small businesses, £2022 (discounted)

		Micro/small exempt
		Low resource /assurance	Medium resource /assurance	High resource /assurance
Year 0 (first year)	Familiarisation	£176,240	£195,244	£195,244
	Inspections	£7,790	£38,952	£77,903
	Reconfiguration	£7,790	£38,952	£77,903
	Overheads	£82,789	£165,578	£165,578
	Total	£274,610	£438,726	£516,629
Years 1-25 (next 24 years)	Inspections (undiscounted)	£186,968	£934,840	£1,869,679
	Overheads (undiscounted)	£1,986,939	£3,973,877	£3,973,877
	Total (discounted)	£1,454,558	£3,284,416	£3,909,916
Total over 25 years(discounted)		£1,729,168	£3,723,141	£4,426,545

Guidance

Guidance will be prepared ahead of implementation that will provide advice on the recommended enforcement approach. It is uncertain what this will cost, and as such has not been included in the cost estimates at this stage. To give a general indication of the potential scale of costs, the Scottish Government budgeted funding of up to £50,000 for the preparation of materials to licence holders ahead of the introduction of Minimum Unit Pricing of Alcohol in Scotland^[53].

Health

Section 2.3 sets out the health harms of poor diet and obesity as set out under the rationale for taking action.

Health benefits from the proposed policy are modelled using the Department of Health and Social Care Calorie model (v3). The model is calibrated to the English population although the results are adjusted for the size of the Scottish population.

This is a cohort-based Markov model that uses calorie reductions to estimate the benefits to health, and the associated changes in: NHS spending, Social Care spending, and Economic output. These are estimated over a 25 year horizon, and use different discount rates for health benefits compared to costs, in keeping with Green Book guidance. See Annex A for more details.

Input to the model is taken from the reduction in calories^[54] estimated by the SRUC economic modelling work from the introduction of promotion restrictions^[55]. The calorie reductions from the modelling work were produced for discretionary foods and for all price promotions and multi-buy promotions only.

The calorie reductions are adjusted for the other options in line with either the share of reduced targeted foods (i.e. share of sales which are discretionary to discretionary plus additional) and for exemptions by using the turnover of exempt businesses.

The model estimates the impact of reduced calories through the effect on the BMI distribution and therefore the incidence of type 2 diabetes, coronary heart disease, stroke, colorectal cancer, breast cancer and liver disease in the cohort. Mortality and incidence are age-adjusted.

Benefits from weight loss in the healthy and underweight BMI categories are also included to capture other benefits beyond the reductions in incidence of disease.

Health benefits to individuals are valued using Quality Adjusted Life Years (QALYs). QALY changes are calculated from the reduced number of deaths and the reduction of people living with the diseases. These are then converted into monetised QALYs using the value of a QALY given in the Green Book (currently £60,000).

People who fall ill with an obesity-related illness in later life may already be in less than perfect health. Accordingly, the model does not assume a QALY value of one for individuals in the “healthy” state (which in model terms means they are free of obesity-related illness). Instead, an age detriment is applied to all QALY values. This is done to allow for the increased prevalence of diseases not explicitly included in the model at older ages. The model uses a QALY disease detriment to calculate the QALY value for an individual in the disease state.

Savings to the NHS are calculated from the reduced treatment requirements for each disease.

Social care cost changes are calculated due to a reduced proportion of overweight, obese, and morbidly obese individuals and hence fewer people needing social care in the treatment scenario. This assumes that the probability of requiring social care increases with BMI.

Economic productivity effects are assessed in two categories. First, reductions in mortality are used to calculate the impact of mortality on economic output from an increased workforce. This is done by considering everyone within a cohort to earn the median wage of a person of that age and gender, with a larger workforce present in the treatment scenario.

Secondly, the model calculates the impact of morbidity on economic output using an employment rate that varies with disease state. This change has been made to reflect the lower productivity and rates of employment seen for individuals with one of the six modelled diseases (type 2 diabetes, coronary heart disease, stroke, colorectal cancer, breast cancer and liver disease).

The results from the baseline SRUC modelling inputted into the DHSC calorie model is shown in Table 45. These results are presented for the full policy appraisal period and have been uprated into 2022 prices.

Table 45: Estimated monetary value of benefits from reduced calorie consumption (as estimated from SRUC economic modelling) over 25 year policy period (discounted), results from DHSC calorie model, £2022

	Multi-buy only			All price promotions
	Lower	Central	Upper	Lower	Central	Upper
QALYs	36,400	40,100	43,700	142,400	158,300	174,000
Economic Output (£m)	235	258	281	914	1,016	1,117
NHS Costs (£m)	153	169	185	603	670	737
QALY (£m)	1,726	1,998	2,070	6,744	7,496	8,243
Social Care Costs (£m)	189	207	225	706	780	853
Total (£m)	2,303	2,632	2,761	8,967	9,962	10,950

The results from DHSC calorie model are provided in 2013 prices. These have been uprated into 2022 prices using the GDP deflators, with the exception of QALY value which have not been uprated as per guidance from DHSC.

The monetary value of the health benefits have been modelled based on the two key scenarios analysed in the SRUC economic modelling, all price promotions or multi-buy only price promotions and based on discretionary foods only. To consider the potential impacts across the wider range of options (i.e. including additional foods within the restrictions, exemptions based on business size), we weight these core results by the estimated reduction in retail profits in each option.

Summary of methodology section

To model the impacts of the policy propositions on Scotland, we have identified sectors affected: retailer, out of home, manufacturers, government, and health. We have identified how proposed regulations will affect costs, revenues and profits to businesses; the additional burden on local government; and the impacts on consumers’ health and spending in the health sector.

In order to address the uncertainty in this modelling exercise, we implement a range of values on some assumptions to present the estimate impacts under a lower and upper scenario alongside the central estimates.

Costs and Benefits of Options

The costs and benefits of all options are presented as a net present value (NPV) over 25 years (using a 3.5% discount rate), relative to the ‘do nothing’ option 1. The costs and benefits models were developed by separating affected sectors of the economy: Retail; Out of Home; Manufacturers; Health; and Government. The estimated costs are also broken down by one-off transition costs and also annual recurring costs, all in 2022 prices. The estimated benefits are not available as annual costs, and are presented in present value (positive) terms only.

Option 2

Building on two previous consultations undertaken by the Scottish Government in 2017/18, and in 2018/19, the 2022 consultation presented a number of different options for food categories to be targeted by promotion restrictions. Option 2 considers the implementation of restrictions on volume price promotions (i.e. multi-buy) and location restrictions for discretionary foods plus ice creams and dairy desserts only which fail a NPM test. This is on the basis that discretionary foods account for around 20% of calories and fat in our diet, and more than half of free sugars^[56] intake. It includes no exemptions for any of the restrictions by store size, and as such all businesses are considered in scope for the assessment of costs and benefits.

Costs – Option 2

Table 46: Present Value of Costs of Option 2 (£2022)

	Option 2 Costs (£2022)
	Low	Central	High
Recurring Costs (annual)	(£962,433)	(£2,540,756)	(£5,327,555)
Retail profits (volume/price)	(£176,800)	(£353,600)	(£530,400)
Retail profits (location)	(£115,265)	(£325,926)	(£731,947)
OoH profits	(£335,352)	(£842,792)	(£1,217,857)
Manufacturer profits	(£218,688)	(£685,166)	(£2,346,386)
Government enforcement costs	(£116,328)	(£333,272)	(£500,965)
One-off transition costs	(£7,793,029)	(£13,625,779)	(£19,460,195)
Retail industry	(£5,046,968)	(£8,476,016)	(£11,942,508)
Familiarisation	(£442,176)	(£663,265)	(£878,357)
Product assessment	(£3,357,979)	(£5,319,126)	(£7,323,712)
Store planning and adjustment	(£1,246,813)	(£2,493,626)	(£3,740,438)
OoH industry	(£2,419,954)	(£4,453,554)	(£6,486,092)
Familiarisation	(£758,739)	(£1,131,125)	(£1,502,447)
Product assessment	(£256,337)	(£512,674)	(£769,011)
Store planning and adjustment	(£1,404,878)	(£2,809,756)	(£4,214,634)
Government	(£326,107)	(£696,209)	(£1,031,596)
Present Value of Costs (25 years)	(£23,439,062)	(£54,930,225)	(£106,068,944)

Benefits – Option 2

We use the value of reduced profits in the retail and OoH sector to weight the estimated benefits from the DHSC calorie model outputs. Relative to the multi-buy only baseline (Option 3(a)), the reduction in profits are 81%, 82% and 82% from low, central, high scenarios respectively. Weighting the benefits by these shares gives an estimated present value of benefits of over £2 billion in the central scenario over the 25 year policy period. It should be noted that 76% of the benefits are from QALYs, which will not be financial savings but the monetary value on the improvement in peoples quality of living. See Table 47.

Table 47: Present Value of Benefits of Option 2 (£2022)

	Low	Central	High
Economic Output PV	£ 190,965,993	£ 210,917,471	£ 231,124,868
NHS Costs PV	£ 124,672,099	£ 138,290,229	£ 152,082,164
QALY PV	£ 1,403,614,775	£ 1,633,731,156	£ 1,702,211,238
Social Care Costs PV	£ 153,366,471	£ 169,131,935	£ 185,100,002
Benefits PV (25 years)	£ 1,872,619,339	£ 2,152,070,790	£ 2,270,518,272

Summary – Option 2

Taking the present value of the costs and benefits together gives an estimate of the Net Present Value (NPV) of Option 2 over the next 25 years. See Table 48.

Table 48: Net Present Value of Option 2, £2022

	Low	Central	High
NPV (25 years)	£ 1,849,180,277	£ 2,097,140,565	£ 2,164,449,328

Option 3

Option 3 would be consistent with categories set out in the UK Government regulations for England and considers the implementation of restrictions on volume price promotions (i.e. multi-buy) and location restrictions for discretionary foods and additional foods most associated with childhood obesity which fail a NPM test. In line with the UK Government approach, meal deals and TPRs are not included under this option. This is in line with Scotland’s aim to halve childhood obesity by 2030 and is in the context of the Scottish Health Survey 2022 that reported that one third of children were at risk of overweight (including obesity). This was 5 percentage points higher than in 2021, and the highest level since 2011.

We consider the potential impact of the policy with no exemptions (Option 3a), exempting micro and small businesses from location promotion restrictions (Option 3b) and exempting micro and small businesses from both location and price promotion restrictions (Option 3c).

Costs – Option 3

Table 49 : Present Value of Costs of Option 3a, without exemptions by store size (£2022)

	Option 3a (no exemption)
	Low	Central	High
Recurring Costs (annual)	(£1,159,223)	(£3,010,418)	(£6,255,387)
Retail profits (volume/price)	(£229,942)	(£459,884)	(£689,826)
Retail profits (location)	(£132,976)	(£374,973)	(£842,384)
OoH profits	(£408,605)	(£1,026,889)	(£1,483,881)
Manufacturer profits	(£271,372)	(£815,401)	(£2,738,331)
Government enforcement costs	(£116,328)	(£333,272)	(£500,965)
One-off transition costs	(£7,793,029)	(£13,625,779)	(£19,460,195)
Retail industry	(£5,046,968)	(£8,476,016)	(£11,942,508)
Familiarisation	(£442,176)	(£663,265)	(£878,357)
Product assessment	(£3,357,979)	(£5,319,126)	(£7,323,712)
Store planning and adjustment	(£1,246,813)	(£2,493,626)	(£3,740,438)
OoH industry	(£2,419,954)	(£4,453,554)	(£6,486,092)
Familiarisation	(£758,739)	(£1,131,125)	(£1,502,447)
Product assessment	(£256,337)	(£512,674)	(£769,011)
Store planning and adjustment	(£1,404,878)	(£2,809,756)	(£4,214,634)
Government	(£326,107)	(£696,209)	(£1,031,596)
Present Value of Costs (25 years)	(£26,638,236)	(£62,565,409)	(£121,152,480)

Table 50: Present Value of Costs of Option 3b, with location promotion exemptions by store size (£2022)

	Option 3b (location exemption)
	Low	Central	High
Recurring Costs (annual)	(£894,043)	(£2,227,129)	(£4,732,164)
Retail profits (volume/price)	(£229,942)	(£459,884)	(£689,826)
Retail profits (location)	(£113,201)	(£313,509)	(£705,900)
OOH profits	(£235,085)	(£590,806)	(£853,730)
Manufacturer profits	(£229,130)	(£677,876)	(£2,278,178)
Government enforcement costs	(£86,684)	(£185,054)	(£204,530)
One-off transition costs	(£5,424,335)	(£8,939,331)	(£12,400,600)
Retail industry	(£4,053,586)	(£6,561,519)	(£9,106,896)
Familiarisation	(£297,642)	(£446,464)	(£589,289)
Product assessment	(£3,357,979)	(£5,319,126)	(£7,323,712)
Store planning and adjustment	(£397,965)	(£795,930)	(£1,193,894)
OOH industry	(£1,100,034)	(£1,958,562)	(£2,816,027)
Familiarisation	(£469,045)	(£696,583)	(£923,059)
Product assessment	(£256,337)	(£512,674)	(£769,011)
Store planning and adjustment	(£374,653)	(£749,305)	(£1,123,958)
Government	(£270,715)	(£419,250)	(£477,677)
Present Value of Costs (25 years)	(£19,958,569)	(£45,145,218)	(£89,330,220)

Table 51: Present Value of Costs of Option 3c, with location and price promotion exemptions by store size (£2022)

	Option 3c (location and price exemption)
	Low	Central	High
Recurring Costs (annual)	(£855,953)	(£2,178,216)	(£4,668,532)
Retail profits (volume/price)	(£195,747)	(£391,495)	(£587,242)
Retail profits (location)	(£113,201)	(£313,509)	(£705,900)
OOH profits	(£235,085)	(£590,806)	(£853,730)
Manufacturer profits	(£229,130)	(£677,876)	(£2,278,178)
Government enforcement costs	(£82,789)	(£204,530)	(£243,482)
One-off transition costs	(£1,879,617)	(£3,137,811)	(£4,346,174)
Retail industry	(£989,214)	(£1,564,159)	(£2,176,548)
Familiarisation	(£153,108)	(£229,663)	(£300,221)
Product assessment	(£438,141)	(£538,567)	(£682,433)
Store planning and adjustment	(£397,965)	(£795,930)	(£1,193,894)
OOH industry	(£615,793)	(£1,134,926)	(£1,652,996)
Familiarisation	(£179,351)	(£262,042)	(£343,670)
Product assessment	(£61,790)	(£123,579)	(£185,369)
Store planning and adjustment	(£374,653)	(£749,305)	(£1,123,958)
Government	(£274,610)	(£438,726)	(£516,629)
Present Value of Costs (25 years)	(£15,794,635)	(£38,548,524)	(£80,241,339)

Benefits – Option 3

We use the value of reduced profits in the retail and OoH sector to weight the estimated benefits from the DHSC calorie model outputs. Relative to the multi-buy only baseline (option 3a =100%), the reduction in profits are 75%, 73% and 75% from low, central, high scenarios respectively for Option 3b and 71%, 70% and 71% from low, central, high scenarios respectively for Option 3c.

Table 52: Present Value of Benefits of Option 3a over 25 year policy horizon, without exemptions by store size (£2022)

	Option 3a (no exemption)
	Low	Central	High
Economic Output PV	£ 234,827,469	£ 257,945,199	£ 281,062,929
NHS Costs PV	£ 153,307,052	£ 169,124,446	£ 184,941,841
QALY PV	£ 1,726,000,000	£ 1,998,000,000	£ 2,070,000,000
Social Care Costs PV	£ 188,592,009	£ 206,842,848	£ 225,093,688
Benefits PV (25 years)	£ 2,302,726,529	£ 2,631,912,493	£ 2,761,098,457

Table 53: Present Value of Benefits of Option 3b over 25 year policy horizon, with location promotion exemptions by store size (£2022)

	Option 3b (location exemption)
	Low	Central	High
Economic Output PV	£ 175,994,583	£ 189,010,024	£ 209,621,886
NHS Costs PV	£ 114,898,018	£ 123,926,384	£ 137,933,016
QALY PV	£ 1,293,573,751	£ 1,464,039,763	£ 1,543,843,954
Social Care Costs PV	£ 141,342,800	£ 151,564,642	£ 167,878,999
Benefits PV (25 years)	£ 1,725,809,151	£ 1,928,540,812	£ 2,059,277,855

Table 54: Present Value of Benefits of Option 3c over 25 year policy horizon, with location and price promotion exemptions by store size (£2022)

	Option 3c (location and price exemption)
	Low	Central	High
Economic Output PV	£ 165,586,803	£ 179,534,674	£ 200,062,311
NHS Costs PV	£ 108,103,301	£ 117,713,772	£ 131,642,733
QALY PV	£ 1,217,075,765	£ 1,390,645,305	£ 1,473,438,656
Social Care Costs PV	£ 132,984,220	£ 143,966,484	£ 160,223,063
Benefits PV (25 years)	£ 1,623,750,089	£ 1,831,860,236	£ 1,965,366,764

Summary – Option 3

Table 55: Net Present Value of Option 3 over 25 year policy horizon, with and without exemptions, £2022

	NPV (25 years)
	Low	Central	High
Option 3a (no exemption)	£ 2,276,088,293	£ 2,569,347,084	£ 2,639,945,977
Option 3b (location exemption)	£ 1,705,850,582	£ 1,883,395,594	£ 1,969,947,636
Option 3c (location and price exemption)	£ 1,607,955,454	£ 1,793,311,712	£ 1,885,125,425

Option 4

Option 4 considers more extensive price promotions than those set out in the UK Government regulations for England and models the implementation of restrictions on all price promotions (i.e. multi-buy, meals deals and TPRs) and price and location promotion restrictions for discretionary foods and additional foods most associated with childhood obesity which fail a NPM test. This option is more aligned with the approach Welsh Government set out they are minded to pursue.

Economic modelling^[57] has estimated that removal of price promotions such as temporary price reductions, multi-buy and 'Y for £X', just on discretionary foods such as cakes, biscuits, confectionary, crisps, etc., has the potential to reduce calorie intake by 613 calories per person per week (although it was noted this should be considered as an upper estimate). The impact is expected to be even greater if a wider range of high fat, sugar and salt food categories is included.

We consider the potential impact of the policy with no exemptions (Option 4a), exempting micro and small businesses from location promotion restrictions (Option 4b), and exempting micro and small businesses from both location and price promotion restrictions (Option 4c).

Costs – Option 4

Table 56: Present Value of Costs of Option 4a, without exemptions by store size (£2022)

	Option 4a (no exemption)
	Low	Central	High
Recurring Costs (annual)	(£1,944,878)	(£4,363,809)	(£8,205,322)
Retail profits (volume/price)	(£686,562)	(£1,373,123)	(£2,059,685)
Retail profits (location)	(£132,976)	(£374,973)	(£842,384)
OoH profits	(£408,605)	(£1,026,889)	(£1,483,881)
Manufacturer profits	(£600,407)	(£1,255,553)	(£3,318,407)
Government enforcement costs	(£116,328)	(£333,272)	(£500,965)
One-off transition costs	(£7,793,029)	(£13,625,779)	(£19,460,195)
Retail industry	(£5,046,968)	(£8,476,016)	(£11,942,508)
Familiarisation	(£442,176)	(£663,265)	(£878,357)
Product assessment	(£3,357,979)	(£5,319,126)	(£7,323,712)
Store planning and adjustment	(£1,246,813)	(£2,493,626)	(£3,740,438)
OOH industry	(£2,419,954)	(£4,453,554)	(£6,486,092)
Familiarisation	(£758,739)	(£1,131,125)	(£1,502,447)
Product assessment	(£256,337)	(£512,674)	(£769,011)
Store planning and adjustment	(£1,404,878)	(£2,809,756)	(£4,214,634)
Government	(£326,107)	(£696,209)	(£1,031,596)
Present Value of Costs (25 years)	(£39,410,424)	(£84,567,145)	(£152,852,089)

Table 57: Present Value of Costs of Option 4b, with location promotion exemptions by store size (£2022)

	Option 4b (location exemption)
	Low	Central	High
Recurring Costs (annual)	(£1,704,337)	(£3,613,481)	(£6,725,539)
Retail profits (volume/price)	(£686,562)	(£1,373,123)	(£2,059,685)
Retail profits (location)	(£113,201)	(£313,509)	(£705,900)
OoH profits	(£235,085)	(£590,806)	(£853,730)
Manufacturer profits	(£582,805)	(£1,150,989)	(£2,901,694)
Government enforcement costs	(£86,684)	(£185,054)	(£204,530)
One-off transition costs	(£5,424,335)	(£8,939,331)	(£12,400,600)
Retail industry	(£4,053,586)	(£6,561,519)	(£9,106,896)
Familiarisation	(£297,642)	(£446,464)	(£589,289)
Product assessment	(£3,357,979)	(£5,319,126)	(£7,323,712)
Store planning and adjustment	(£397,965)	(£795,930)	(£1,193,894)
OOH industry	(£1,100,034)	(£1,958,562)	(£2,816,027)
Familiarisation	(£469,045)	(£696,583)	(£923,059)
Product assessment	(£256,337)	(£512,674)	(£769,011)
Store planning and adjustment	(£374,653)	(£749,305)	(£1,123,958)
Government	(£270,715)	(£419,250)	(£477,677)
Present Value of Costs (25 years)	(£33,131,328)	(£67,682,799)	(£121,736,019)

Table 58: Present Value of Costs of Option 4c, with location and price promotion exemptions by store size (£2022)

	Option 4c (location and price exemption)
	Low	Central	High
Recurring Costs (annual)	(£1,348,619)	(£3,330,344)	(£6,328,492)
Retail profits (volume/price)	(£584,463)	(£1,168,926)	(£1,753,389)
Retail profits (location)	(£113,201)	(£313,509)	(£705,900)
OoH profits	(£235,085)	(£590,806)	(£853,730)
Manufacturer profits	(£333,080)	(£1,052,572)	(£2,771,991)
Government enforcement costs	(£82,789)	(£204,530)	(£243,482)
One-off transition costs	(£1,879,617)	(£3,137,811)	(£4,346,174)
Retail industry	(£989,214)	(£1,564,159)	(£2,176,548)
Familiarisation	(£153,108)	(£229,663)	(£300,221)
Product assessment	(£438,141)	(£538,567)	(£682,433)
Store planning and adjustment	(£397,965)	(£795,930)	(£1,193,894)
OOH industry	(£615,793)	(£1,134,926)	(£1,652,996)
Familiarisation	(£179,351)	(£262,042)	(£343,670)
Product assessment	(£61,790)	(£123,579)	(£185,369)
Store planning and adjustment	(£374,653)	(£749,305)	(£1,123,958)
Government	(£274,610)	(£438,726)	(£516,629)
Present Value of Costs (25 years)	(£23,803,778)	(£57,278,384)	(£107,226,902)

Benefits – Option 4

We use the value of reduced profits in the retail and OoH sector to weight the estimated benefits from the DHSC calorie model outputs. Relative to the all price promotions baseline (option 4a =100%), the reduction in profits are 84%, 82% and 83% from low, central, high scenarios respectively in Option 4b and 76%, 75% and 76% in Option 4c.

Table 59: Present Value of Benefits of Option 4a over 25 year policy horizon, without exemptions by store size (£2022)

	Option 4a (no exemption)
	Low	Central	High
Economic Output PV	£ 913,758,700	£ 1,015,963,401	£ 1,116,951,380
NHS Costs PV	£ 603,494,427	£ 670,414,172	£ 737,333,917
QALY PV	£ 6,744,000,000	£ 7,496,000,000	£ 8,243,000,000
Social Care Costs PV	£ 705,699,129	£ 779,919,210	£ 852,922,568
Benefits PV (25 years)	£ 8,966,952,256	£ 9,962,296,783	£ 10,950,207,865

Table 60: Present Value of Benefits of Option 4b over 25 year policy horizon, with location promotion exemptions by store size (£2022)

	Option 4b (location exemption)
	Low	Central	High
Economic Output PV	£ 769,944,130	£ 833,804,150	£ 921,715,667
NHS Costs PV	£ 508,511,703	£ 550,210,882	£ 608,452,826
QALY PV	£ 5,682,575,955	£ 6,151,989,235	£ 6,802,178,127
Social Care Costs PV	£ 594,630,620	£ 640,081,988	£ 703,837,345
Benefits PV (25 years)	£ 7,555,662,408	£ 8,176,086,255	£ 9,036,183,965

Table 61: Present Value of Benefits of Option 4c over 25 year policy horizon, with location and price promotion exemptions by store size (£2022)

	Option 4c (location and price exemption)
	Low	Central	High
Economic Output PV	£ 693,981,145	£ 759,044,584	£ 843,712,682
NHS Costs PV	£ 458,341,741	£ 500,878,522	£ 556,960,659
QALY PV	£ 5,121,930,813	£ 5,600,396,824	£ 6,226,523,161
Social Care Costs PV	£ 535,964,133	£ 582,691,711	£ 644,272,974
Benefits PV (25 years)	£ 6,810,217,832	£ 7,443,011,642	£ 8,271,469,476

Summary – Option 4

Table 62: Net Present Value of Option 4 over 25 year policy horizon, with and without exemptions for location promotions, £2022

	NPV (25 years)
	Low		Central		High
Option 4a (no exemption)	£ 8,927,541,832	£ 9,877,729,638		£ 10,797,355,776
Option 4b (location exemption)	£ 7,522,531,080	£ 8,108,403,456		£ 8,914,447,946
Option 4c (location and price exemption)	£ 6,786,414,054	£ 7,385,733,258		£ 8,164,242,574

Summary of Costs and Benefits – All Options (Central)

Table 63: Costs and Benefits of all options (relative to the do nothing option), summary of central scenarios, £2022

	Recurring Costs (annual)	One-off transition costs	Present Value of Costs (25 years)	Benefits Present Value (25 years)	Net Present Value (25 years)
Option 2	(£2,540,756)	(£13,625,779)	(£54,930,225)	£2,152,070,790	£2,097,140,565
Option 3a	(£3,010,418)	(£13,625,779)	(£62,565,409)	£2,631,912,493	£2,569,347,084
Option 3b	(£2,227,129)	(£8,939,331)	(£45,145,218)	£1,928,540,812	£1,883,395,594
Option 3c	(£2,178,216)	(£3,137,811)	(£38,548,524)	£1,831,860,236	£1,793,311,712
Option 4a	(£4,363,809)	(£13,625,779)	(£84,567,145)	£9,962,296,783	£9,877,729,638
Option 4b	(£3,613,481)	(£8,939,331)	(£67,682,799)	£8,176,086,255	£8,108,403,456
Option 4c	(£3,330,344)	(£3,137,811)	(£57,278,384)	£7,443,011,642	£7,385,733,258