UK packaging tax likely to push costs onto consumers, warns retail body

Core Insights - The new packaging tax under the extended producer responsibility (EPR) scheme is expected to pass over 80% of its additional costs onto consumers, which will further strain the retail sector already facing financial pressures [1][2][3] Cost Implications - The EPR scheme mandates that firms pay fees based on the type and volume of packaging produced for households, with most costs being unabsorbed within existing margins [2] - Retailers faced approximately £5 billion in extra costs last year due to increases in employer National Insurance contributions and the National Living Wage [2] Inflationary Pressure - Analysts, including those from the Bank of England, predict that the new packaging tax could contribute an additional 0.5 percentage points to food inflation, exacerbating the financial strain on households [3] Compliance Burden - A significant 85% of retailers reported a notable increase in administrative workload since the EPR's introduction, requiring detailed data collection on packaging [4] - Recent regulatory guidance mandates businesses to report various aspects of packaging activity, although compliance enforcement for recyclability assessment data has been temporarily suspended for the first half of 2025 [5] Retailer Responses - In response to the cost burden, 85% of retailers plan to increase their use of sustainable packaging, while 78% intend to reduce total packaging volume [6] - The British Retail Consortium (BRC) is advocating for the government to legally ring-fence EPR funds for local authorities to enhance household recycling collection and system improvements [6] Industry Perspective - The BRC director for food & sustainability emphasized that while retailers accept the "polluter pays" principle, the timing of the levy during a cost-of-living crisis raises concerns about the value consumers receive for higher prices [7]