Embattled PackUK bosses have tried to reassure the food and packaging industry after a “catastrophic” shortfall left companies facing the prospect of their EPR bills being ripped up and replaced by bigger invoices.
The Grocer revealed on Monday that Defra’s packaging tax body has warned companies it may have to reissue bills for the first year of the controversial scheme, after calculations showed the money raised from the tax had fallen tens of millions short of what is intended to pay for local authority recycling.
The disastrous start to the first year of the scheme, which has already been rattled by a string of previous problems, today saw PackUK strategy director Esther Carter face the awkward task of taking to the stage at the Birmingham Packaging Innovations conference, attended by hundreds of food companies and packaging bosses, to explain the situation.
“What has not always been clear to people is that PackUK is required to balance the books at the end of each year,” she said. ”PackUK can have no surplus nor can it have a gap.
“So if any of those items change there is a need to talk about how we calculate fees. We are the first to recognise that in year one that creates a lot of challenge and we are working to figure out how to amend the legislation so we can create as much stability as possible for producers in future years.
“We have heard the cries from industry absolutely loud and clear. It is absolutely our intent to make sure we are providing multiple year visibility in advance of what is to come. None of us like surprises. But we also have to make sure we are operating in line with the law.”
A ’total nightmare’
Companies claim they had been left “shell-shocked” by the news, delivered in an emergency industry call by PackUK late last week.
One major suppler at the event described the situation as a “total nightmare”. Another senior supplier source added: “There is huge anger among suppliers over this. It is realy poor management of what is supposed to be the government’s landmark environmental strategy.”
The situation facing the industry was described as “catastrophic” by Jason Galley, CEO of the Metal Packaging Manufacturers Association (MPMA).
He said: “Those following the EPR scheme over the past year will no doubt be scratching their heads at how much the new system has been plagued with problems.
“These are not just inconsequential, minor teething or administrative glitches, but instead issues that are having real, immediate impacts on businesses across the country affecting costs, cashflow and budgeting.
“The potential shortfall in the collection of EPR fees, following a high number of appeals, demonstrates the confusion among producers around what the fees should be. More worrying is that issues with rising costs are hard-wired within the EPR system. This could fairly be described as a hospital pass for the incoming PackUK team back this time last year.
“Since the publishing of the first base fees in August 2024, the MPMA has consistently highlighted the EPR system will push brands towards higher volumes of packaging that recycle at lower rates and are more costly to process as a result. Even before the under-funding of the scheme was announced this week, we were expecting rising costs, year on year. Now it seems there will be even higher fees to be borne to make up the collection shortfall. Where will it end?
“In any business, getting your pricing wrong can be catastrophic, yet this is exactly the situation that has been unintentionally created. If uncorrected, the consequences will be costly for UK plc.”
Pointing out that retailers have already budgeted accordingly an “extremely challenging cost environment”, Naomi Brandon-Bravo, sustainability policy adviser at the BRC, said: ”Adjusting charges at this late stage, potentially by millions of pounds, would create significant uncertainty for businesses.
”Given this was the first year of an ambitious new scheme, it is unclear why safeguards were not in place to prevent this situation. If there is a funding shortfall, it should be met by Government across the UK rather than retrospectively increasing costs for producers.”
Robbie Staniforth, chief policy and impact officer at Ecosurety, added: “PackUK has the very difficult job of turning imperfect packaging data into EPR fees for producers.
“Clearly cost control is important for all liable businesses, but so is covering all of the necessary recycling collection costs. This news goes to show that the best way for companies to mitigate their exposure is to urgently review all of the packaging formats they are using.”
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