Money matters: UK Plastic Packaging Tax crippling UK businesses, finds Lindum Packaging

10 May 2022 --- One in five companies using plastic packaging in the UK have seen their costs increase by more than 75% due to the UK Plastic Packaging Tax, according to research commissioned by Lindum Packaging. 

Introduced on April 1, the tax levies any company annually importing more than 10 metric tons of plastic packaging containing less than 30% recycled content by £200 (US$247) per metric ton. Any amount less than 10 metric tons can be exempted in certain circumstances. The tax is estimated to impact over 20,000 businesses in the UK. 

However, despite years of deliberation and transition time before the legislation came into effect, 77% of retail businesses were unaware the tax even existed at the time it was enforced, according to a YouGov poll. 

With the tax now in place, Lindum has found that of the 70% of companies experiencing cost increases, their expenses have risen by 24%. Further, 20% of companies have seen their costs increase by more than 75%. 

While Lindum finds that 90% of businesses are now aware of the tax, only 10% say they understand the legislation and its implications.Many SMEs are paying heavy costs for the tax despite being unable to avoid using virgin plastics.

Unfair dues? 
The tax is intended to circularize the UK’s plastics economy by incentivizing businesses to use more recycled plastic and deter them from using virgin plastic. Given the sharp rise in the cost of recycled plastics, which in some cases has more than doubled in the past year, many companies cannot avoid the tax. 

This scenario has led many to resort to reductions and redesigns. Lindum’s research revealed that most businesses had made efforts to reduce the level of plastic packaging they use, switching away from plastic or swapping to recycled content material. Findings of the survey highlighted that several companies had adopted all three of these measures.

The research also shows that cost increases are likely to feed down the supply chain, with half of the businesses surveyed confirming they plan to pass the increase onto their customers. Lindum says these findings confirm that the short-term impact of the tax will have serious effects on supply chain costs. 

While these results are unsurprising to many and welcome in some respects, industry quarters warn that the law is punishing businesses who cannot meet the tax’s requirements. Notably, F&B packaging producers often use plastics that are contaminated by food and cannot be recycled. The UK’s Food and Drink Federation stated before the introduction of the levy that many of its members will be penalized despite supporting the legislation’s aims. Funds raised by the tax are not being guaranteed for the recycling sector.

Reinvesting the funds 
Another major point of contention is how the government will spend the money raised through the plastics tax. 

With so many businesses seeing such large cost increases, which will feed down the supply chain to consumers, the money collected should be spent on improving recycling infrastructure, argue some industry commentators. 

However, we spoke to three industry experts who explained that the government does not want any stipulations on what it should fund. This stance means the capital drawn from the tax, which is often small businesses, could be put into anything policymakers see fit. As prices skyrocket throughout industry, they argue that this added levy should at least be guaranteed to improve and modernize chemical and mechanical recycling, collection and sortation systems, and education. 

By Louis Gore-Langton