A new packaging tax to fund recycling will push up the price of many products including soft drinks, beer, kitchenware and small appliances such as kettles and toasters, companies have warned.
Pev Manners, the managing director of the cordial maker Belvoir Farm, said the preliminary cost for glass in the extended producer responsibility (EPR) for packaging was “nuts”. The brand would have to pass on the levy as the fees would wipe out its annual profits, he said.
The EPR, which comes into effect next year, shifts the cost of household recycling from councils back on to the companies using the packaging.
In August, the Department for Environment, Food and Rural Affairs (Defra) published its “first estimate” of the rates to be charged for each tonne of material, giving companies a price range from the lowest to the highest.
The rate for glass was “spectacularly high”, spanning £130 to £330 a tonne, Manners said. Based on the highest cost scenario covering the fees would add 25p – the equivalent of a 10% price increase – to a bottle of its elderflower cordial.
“Last year, we turned over £21m and made £900,000 profit,” he said. “My finance director estimates this tax will cost us £850,000 next year, so 100% of our profits.”
In a statement, Defra said the EPR was a “vital first step in cracking down on waste as we move towards a circular economy, and we have always been clear these fees are our initial estimates … We are continuing to meet with the glass industry to discuss more workable approaches, including for how we calculate the cost of glass.”
Any price increase would result in lost sales “because people are not feeling rich”, Manners said, adding that in the short-term it would benefit rivals that used cans and plastic because the UK’s deposit return scheme (DRS) was not due to start until 2027.
“At retail we think the EPR will put between 18p and 25p on a 750ml bottle because the grocers will just see it as part of the cost, add their profit margin and then put VAT on top,” Manners said.
Others in the drinks industry have also been worriedly doing the maths. In a joint letter the British Beer and Pub Association, Independent Family Brewers of Britain, Campaign for Real Ale, and Society of Independent Brewers and Associates, suggested it would put between 3p and 7p on each of the 3.2bn bottles of beer sold in the UK each year.
When Ian Bray, the chief executive of Fentimans, known for its botanically brewed ginger beer, calculated its bill he feared the “death of Fentimans”. “At the high end of their [glass] cost estimate it was a number which was greater than my profit for the year,” he said, having worked out it would add 50p to a 750ml bottle of its soft drinks.
Glass is hit hard because it is heavy and Defra is using weight as a key metric but as talks with industry continue Bray is more optimistic. “If they base it on volume rather than weight, then that will probably reduce the cost for glass by about a third, which starts to become more reasonable,” he said.
It is not just the drinks industry that is worried. The British Home Enhancement Trade Association, which represents DIY, garden, housewares and small electricals suppliers, said the “EPR tax will lead to price hikes across all manner of consumer goods”.
Will Jones, its chief operating officer, said: “Producers will be unable to absorb these costs and will either have to pass them up the supply chain to retailers and ultimately consumers, adding to pressure on inflation, or implement damaging cost cutting measures in their business potentially leading to job losses.”
At the end of 2023 the government finally set out the details of a new “simpler recycling” regime for England, which included a list of items councils must recycle come 2026. This standardised service (with other home nations expected to align with the legislation) dovetails with the EPR and DRS.
The official analysis is that even if producers do not seek to minimise costs, and pass fees on to consumers, the impact on inflation would be small, potentially increasing CPI inflation by 0.04-0.09%. Other estimates measure the impact on the consumer at less than £1 for each household a week.
From 2026, fees will be “modulated”, meaning that packaging with a lower environmental impact will be cheaper to use.
The policy should help reduce the “environmental burden of used packaging and support increased collection and recycling, so it is positive step forward,” said Lee Marshall, policy and external affairs director at the Chartered Institution of Wastes Management. “The system should mean packaging is designed to be more easily recycled, more of it is collected for recycling and that producers, rather than local authorities, fund all of this.
“The scheme has been a long time in design and that has been frustrating for the resources and waste sector and for producers as well. However, at some point the government will have to have to put something in place. Both the producers and the local authorities are concerned … so, you could argue it’s probably about right if both sides are unhappy.”