New figures from the British Retail Consortium (BRC) reveal that over 80% of costs of the new packaging tax – the Extended Producer Responsibility (EPR) scheme – are likely to be passed on to consumers. The new tax came into effect at the start of the month.
The BRC's survey of leading retailers highlights the significant financial burden that EPR fees will place on UK retailers and households.
Following last year’s Budget, where retailers were hit with £5b in extra employment costs due to higher employer National Insurance and rising National Living Wages, the industry has been left with little room to absorb additional costs, says the BRC: "With EPR set to cost industry billions, this new tax will be yet another inflationary pressure, at a time when food prices are already rising fast, with The Bank of England estimating that the policy alone will add 0.5% to food inflation.
"In addition to the financial impact, 85% of retailers said the administrative and compliance burden they face has increased significantly as a result of EPR. Firms are now required to report extensive information on the composition and amounts of packaging they are putting on the market. This creates further pressure on businesses already grappling with rising costs and a heavy regulatory burden."
The new packaging tax is levied on any company which produces packaging bought and disposed of by households, which includes retailers and brands. The fees are based on the materials and amounts used. Retailers are making every effort to use more recyclable materials and less packaging, with the survey showing that: 85% of retailers intend to increase the proportion of sustainable packaging placed on the market; and almost four in five retailers (78%) intend to reduce the total volume of packaging they place on the market
But, with prices set to increase as a result of the new tax, the Government must provide greater clarity on how consumers and the environment will benefit, says the BRC, which is calling on Government to put in place legal restrictions (ringfencing) to ensure the money raised from EPR can only be used by local councils to collect and operate local recycling, as well as fund improvements to local recycling systems.
Andrew Opie, director of food and sustainability at the BRC, says: “Retailers support the polluter pays principle and are making significant changes to reduce and improve their packaging. But the packaging tax is also a multi-billion pound levy being paid by consumers during a cost of living crisis. They will ask, what are we getting for higher prices? Unless funds are spent transparently and effectively, EPR threatens to just be another burden on an already overtaxed industry with no tangible benefits for customers or the environment.”
