UK's New Packaging Tax Sparks Inflation Fears and Industry Backlash
A new packaging tax is set to raise costs for businesses and consumers across the UK. The Extended Producer Responsibility (EPR) scheme will increase taxes on some containers by 19% and on plastic by 15%. Industry leaders warn that food prices will climb as a result, while the Bank of England predicts higher inflation.
The EPR regime, designed to boost recycling, will generate over £1bn annually for the government. Officials claim it will also create 25,000 jobs. However, funds collected will be handed to local councils, which may redirect them to social care or planning instead of recycling improvements.
Supermarket bosses and food producers have raised concerns about rising costs. They argue that the tax, combined with other financial pressures, will push up food prices. The Bank of England estimates the EPR will add 0.5 percentage points to CPI inflation. Reports earlier suggested the government might scrap the tax if supermarkets agreed to freeze food prices. But the policy remains in place, sparking criticism from manufacturers. British Glass, an industry body, reported falling domestic glass production, increased imports, and uncertainty over future investments. Vidrala, owner of glassmaker Encirc, may now pull a £500m investment in greener blast furnaces due to the tax. Nick Kirk, director at British Glass, called the government’s approach disappointing. He argued it ignores the damage to UK manufacturing and fails to address industry concerns.
The EPR tax is moving forward despite warnings about higher costs for households and businesses. Local councils will receive the funds but can spend them beyond recycling. Meanwhile, manufacturers face investment cuts and production declines as the policy takes effect.
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