FCA Statement On Co-Manufacturers—Consumer Duty And Product Governance

The FCA has issued a short statement providing views on how it interprets the rules in relation to co-manufacturers under the FCA's consumer duty and product governance regimes. This is in advance of a review of the rules and a consultation on amendments promised for next year. This bulletin provides an overview of the FCA statement.

FCA statement

• What has been issued and why—On December 8, 2025, the FCA published a short document titled "Statement on firms working together to manufacture products or services".¹ This was issued to deliver on a promise made by the FCA in a letter sent to the Chancellor on September 29, 2025:²

"This year [2025], we will ... Provide more clarity on our supervisory approach and expectations under the Duty when firms work together to manufacture products for retail customers. We will look to reduce the potential for misunderstanding leading to excessive compliance costs, duplication of effort between firms and adverse impacts on business models where firms work together. This will help give comfort to firms and their senior managers, and a better understanding of how our standards apply."

• In our view, the statement is helpful in some respects, but it would be difficult to say that it reduces the potential for misunderstanding, provides comfort to firms and their managers, or gives a better understanding of the rules. But given that another paper has been promised, we are hopeful that this will come.

Next steps

• The FCA proposes to conduct a review of its rules and publish a consultation on amendments next year, although the precise timeline is unclear.
• The review will include the rules as to when firms are "co-manufacturers" and it is hoped the consultation will propose a "pare back", as there are some concerns in the industry that they are overly broad and uncertain at present.
• Consistent with the FCA and UK regulatory agenda of focusing on growth and reducing the regulatory burden on firms, we would also argue that the regulatory burden that arises in some scenarios from the FCA finding that a co-manufacturer role exists are either disproportionate, unnecessary or both.

FCA guidance

• The FCA says that, in supervisory work conducted at present, it tests whether firms are working together to support good customer outcomes by:
  • correctly identifying which firms have a manufacturer role in a product or service ultimately provided to retail customers
  • where there is more than one manufacturer, asking if they have a written agreement in place allocating responsibilities between them.
• However, this begs a fundamental question: where is the line drawn, and how does the FCA think firms should correctly (as opposed to incorrectly) apply the test for co-manufacturing. The FCA gives no colour on this.
  • The FCA says its focus is on the effective and appropriate allocation of responsibilities. It does "not expect firms to duplicate effort or oversee each other's activities".
  • The FCA says regulated firms can rely on each other "where reasonable" to comply with the relevant rules. But again, this begs a fundamental question – if the other firm is regulated, when is ever it "unreasonable" to rely on another firm and why. Again, the FCA gives no colour on this.
  • The arrangements between relevant firms should make it clear which firm is responsible, to ensure accountability and effective supervision by the FCA. It should not be possible for responsibilities to slip between the cracks.
  • The FCA says its rules should not be interpreted to mean firms working together to manufacture products must have a say in each other's decisions, or are expected to engage in joint decision making. Where firms' roles are distinct, it may be appropriate for their responsibilities and decision-making to remain separate, though they should still be clearly agreed and a record kept of the position.
  • The FCA says roles do not need to be allocated evenly—e.g., one firm can cover "most" requirements if that is consistent with the reality of its role and the arrangement between them.
  • The FCA notes that, where a payment firm works with an unregulated programme manager to manufacture products, the regulated firm remains responsible for complying with
  • relevant FCA requirements.
• On co-manufacturer liability, the FCA has said as follows:

"Liability: A firm is generally only liable for remedial action in respect of harm it has caused. However, in some cases, regulatory requirements or contracts might mean a firm is responsible or liable for harm caused by another firm in the distribution chain (see paragraph 2.24 of FG22/5, our finalised guidance on the consumer duty). Outsourcing: An exception to the general position above is where one firm outsources an activity or service to another party."

• In our view, this is not overly helpful, given the use of the word "generally" – this begs the question as to when, outside of outsourcing, the FCA would say exceptions arise. Ideally, the FCA's further work in this area will make more clear when, precisely, one co-manufacturer may be liable for what another co-manufacturer does or does not do.
• Following on from this, in relation to outsourcing, the FCA notes as follows:

"As we noted in FG22/5, where a firm outsources to another party which is itself an authorised firm, generally both firms will have responsibilities under the Duty. We will consider, as part of our planned consultation next year, whether it would be helpful to clarify how rules on outsourcing interact with rules about responsibilities of firms with roles in the distribution chain."

This work will be welcome, as there are some concerns in the industry about this interpretation of how the consumer duty applies or should apply in the context of an outsource.

Recommendations for firms

• Given how contentious this subject has been within some parts of the industry, firms may wish to consider taking up the FCA's suggestion of sharing views with it ahead of time. The FCA invites views and concerns to be sent to ReviewOfRequirementsCFI@fca.org.uk.
• Firms may also wish to get involved in work being done by one or more relevant industry bodies.

Our overall advice is otherwise to "watch this space", and it is hoped that the FCA consultation will be published without too much delay.

Footnotes

1. Statement on firms working together to manufacture products or services

2. Mansion House commitment on the Consumer Duty's application to wholesale firms

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.