David Bellamy, the Food and Drink Federation’s (FDF) senior environment policy manager, says its members are being “greatly impacted by” hikes in 2019 in PRN prices.
As the representative organisation for the UK’s food and drink manufacturers, FDF represents a significant part of the packaging value chain across the UK. It is unsurprising therefore that our members are being greatly impacted by the enormous hikes we have seen in 2019 in PRN prices particularly for aluminium and plastics.
The situation is at crisis point and in FDF’s manifesto for the upcoming General Election, we call on the next Government to work with us to explore all options urgently.
Aluminium PRNs have increased from around £10 per tonne in early 2018 to around £450 per tonne in October 2019, while plastics PRNs have increased from around £60 per tonne in June 2018 to around £400 per tonne in October 2019. These unprecedented price increases have had a significant impact on FDF members, with some experiencing a 20-fold increase in PRN purchasing costs.
We estimate these sorts of price increases will add hundreds of millions of pounds to producer compliance costs in 2019. This is all unbudgeted expenditure. If left unchecked, these costs will undoubtedly have to be passed on directly to consumers and shoppers in higher food prices.
Currently our members are burning through millions of extra costs and soon consumers and shoppers will see the impact unless action is taken
This level of cost increase is clearly unsustainable and without some form of intervention the situation could become unmanageable, leading to a breakdown in the whole PRN system and the UK missing its target obligations.
Probably the biggest concern to our members right now is that they are not seeing any evidence that all this extra money is delivering higher packaging recycling – the ultimate desired endpoint of the scheme. So the obvious question is: where is all this extra money ending up?
The current crisis is multifaceted – changing overseas markets, alleged market manipulation, trading platforms fuelling speculative pricing, and previous fraudulent activity have all no doubt played a part, coupled with a welcome clamp down by Regulators on unscrupulous operators and on quality requirements.
However, there is no transparency around these factors and how they translate into higher costs for reprocessors and the waste management sector. So, our members find themselves in a very volatile and vulnerable position as they cannot protect their businesses from such risks nor can they have any confidence that the system is working fairly.
Furthermore, we must necessarily fear profiteering, given that the current system does not require detailed public accounting and thereby external scrutiny.
As the largest manufacturing sector, our industry takes extremely seriously its responsibilities to protect the natural environment and to use valuable resources efficiently.
Reforms
FDF has made clear its strong desire to work with Government and other stakeholders on reforming the current packaging producer responsibility system and the other interventions set out in the package of Defra consultations published earlier this year.
This includes of course a set of measures (in Chapter 9 of the packaging producer responsibility reform consultation) aimed at addressing system transparency and accountability.
Our members fully accept that they will need to pay substantially more under a reformed system incorporating a full net costs approach providing that such costs are calculated in a fully transparent way and the monies raised are invested back into the improving system. This is clearly not happening with the current situation of PRN cost increases.
We hope that the way in which packaging, particularly plastics, have risen up the public and political agenda in the last few years will finally mean that the latest proposals are followed through into legislation and we get ‘PRN reform done’ to coin a phrase.
The irony of the current situation is that the concerns around the transparency of the PRN system and the outcomes it achieves addressed in these consultations have been known for some time. Before though there hasn’t been the political will to make the necessary changes.
We hope that the way in which packaging, particularly plastics, have risen up the public and political agenda in the last few years will finally mean that the latest proposals are followed through into legislation and we get ‘PRN reform done’ to coin a phrase.
FDF is already talking to other parts of the packaging value chain about a package of regulatory and non regulatory measures, both short and medium term, that now need to be considered to tie us over until any new system comes on stream from 2023 at the very earliest.
This includes the option to incorporate a compliance fee mechanism (as enabled in the measures included in the Environment Bill published in October) as well as other interventions designed to help bolster UK recycling capacity and thereby help to restore confidence going forward in the supply of PRNs.
This is a very serious situation for our industry. We remain resolute in our call for a meeting with the next Government and with other producer representatives at the earliest opportunity following the General Election. Currently our members are burning through millions of extra costs and soon consumers and shoppers will see the impact unless action is taken.
