Business leaders express concern over a proposed 'disturbing' tax on packaging materials
The UK government's introduction of the Extended Producer Responsibility (EPR) scheme for packaging has brought about significant changes for businesses, particularly those using glass packaging. The new scheme, which requires producers and importers to fund the full cost of managing packaging waste, is causing financial strain, raising concerns about competitiveness, and potentially leading to relocation considerations.
## Financial Burden and Competitiveness
The EPR scheme's new base fees, while reduced from earlier estimates, still represent a substantial additional cost for businesses. According to the British Retail Consortium, this could amount to a £2 billion hit to retailers' bottom lines, on top of recent increases in employer national insurance contributions.
Industry groups representing sectors such as whisky, wine, spirits, and hospitality argue that the current EPR design does not meaningfully support a circular economy and disproportionately penalizes glass users. They fear that the added costs will be passed on to consumers, fueling inflation.
## Relocation Concerns
The new packaging tax has sparked concerns that businesses may relocate their production abroad, where regulatory costs may be lower. This is particularly concerning for sectors already facing high operational costs or thin margins. The cumulative effect of increased fees, regulatory complexity, and the perception that glass is unfairly penalized could motivate companies to explore manufacturing or sourcing alternatives outside the UK.
## Regulatory Details and Fee Structure
Businesses with an annual turnover of less than £1 million and those using less than 25 tonnes of packaging per year are exempt from EPR obligations. Larger producers are required to report and pay fees based on both turnover and packaging tonnage.
The government has introduced a fee modulation framework, meaning that fees are adjusted according to the recyclability of the packaging material. This incentivizes the use of more recyclable materials but can disadvantage glass and certain composites.
Proceeds from the EPR tax are earmarked for local authority recycling services, which could help improve waste management infrastructure but does not alleviate the immediate cost burden on producers.
## Summary
The EPR scheme's packaging tax is increasing costs for UK businesses, especially those using glass packaging, by shifting the financial responsibility for waste management onto producers. This is prompting concerns about reduced competitiveness, inflationary pressures, and potential business relocation to jurisdictions with fewer regulatory costs.
While the government has sought to address some industry concerns by ring-fencing funds for recycling and slightly reducing fees, the overall impact remains significant, particularly for sectors heavily reliant on glass and other challenging packaging materials. The EPR scheme, while intended to drive sustainability and improve recycling, is facing criticism for its potential to cause financial strain and operational disruption for UK businesses.
- The increased financial burden on businesses due to the EPR scheme's packaging tax could potentially lead to a significant £2 billion hit to retailers' finances, exacerbated by recent increases in employer national insurance contributions.
- Some industry groups argue that the current EPR design does not adequately support a circular economy and disproportionately penalizes glass users, potentially leading to concerns about passing these added costs on to consumers and fueling inflation.
- The potential financial strain and operational disruption caused by the EPR scheme, along with increases in regulatory costs, has sparked concerns that businesses may choose to relocate their production to jurisdictions with lower regulatory costs, affecting various business sectors, particularly those reliant on glass packaging.
