Skyrocketing prices for food-grade recycled content are threatening to wreak havoc with the government’s single-use plastic tax, which comes into force next month, industry sources have claimed.
The Grocer understands the cost of recycled plastic polymers have shot up by as much as 70% in the past year, causing huge cost implications for companies who will face a £200/tonne tax on material with less than 30% recycled plastic from April.
Leading industry sources claim such is the spiralling cost of recycled materials, including PET and HDPE, that many suppliers are now considering shouldering the tax rather than switching to more expensive packaging.
They said the situation had seen the decision by the government to push ahead with the tax, before the introduction of Extended Producer Responsibility (EPR) next year and a new deposit return scheme (DRS) by the end of 2024 at the earliest, backfire in spectacular fashion.
“This really is a perfect storm,” said one leading supplier. “The prices mean the situation facing suppliers wanting to use recycled plastic is absolutely brutal and quite frankly a lot of them are thinking they just won’t bother.
“The whole situation is a shambles, and I hate to say it but it’s exactly what the industry told the government would happen if it pushed ahead with the tax before creating a proper market that is sustainable.”
Another supplier source said the cost of living with the tax was a “drop in the ocean” compared to the cost of switching to products that would escape it, defeating the object of the fiscal measures.
“Prices of recyclate are at an all-time high and exceeding the premium that the tax would justify,” they said.
“This is a reflection not only of the tax but a big drive by major brands to increase the use of recycled plastics in the packaging they use and a dire shortage of supply.
“When a plastic tax was first mooted, the whole supply chain advocated tackling EPR and consistency of collection first before introducing taxes.
“The Treasury nevertheless went ahead, and the net result is that we have neither the supply or current regulatory framework to incorporate recycled content.
“So, all the tax will do in the short to medium-term is add cost to the inflationary pressures consumers are already feeling, and add extra administration costs.”
Industry sources estimate the cost to UK consumers of the tax being passed on in higher prices could be as high as £300m a year.
It will apply to any company who has manufactured or imported 10 or more tonnes of finished plastic packaging components within the last 12 months.