Small food businesses across Britain are warning that the government’s new packaging tax could have catastrophic consequences, forcing price rises, damaging cashflows and even putting some companies out of business.
The “extended producer responsibility” (EPR) levy, announced in December, requires any company with more than £1 million in annual sales and using over 25 tonnes of packaging to pay fees designed to improve recycling infrastructure. Compliance costs are expected to hit £1.4 billion across the sector in the first year alone, according to the Food and Drink Federation.
For Nadine Maggi, founder of Sweet Freedom, which produces natural spreads and syrups, the new charge is the final straw in what she describes as the toughest trading environment she has seen in 15 years. The tax will land her company with an additional £50,000 bill this year — on top of soaring cocoa prices, higher minimum wages, and rising national insurance costs — leaving Sweet Freedom facing its first loss in years.
“This is tougher than anything I’ve ever faced in my entire career,” said Maggi. She has already increased prices by 12 per cent due to rising ingredient costs but is reluctant to raise them again, fearing it would damage sales. Instead, she is cutting overheads and pulling outsourced work back in-house.
Stu Macdonald, founder of peanut butter brand Manilife, who is leading a campaign for a rethink, said the EPR could be “existential” for many smaller brands. His company, with annual sales of £7 million, expects a £200,000 bill. “Had this happened a year ago, I’m not sure we would have survived,” he said.
Macdonald and over 100 food businesses argue that the changes were poorly communicated and will disproportionately affect small and medium-sized enterprises (SMEs). They claim many SMEs only recently became aware of their liability, although the Department for Environment, Food and Rural Affairs insists it carried out “extensive engagement”.
Katie Jewitt, chief operating officer of Momo Kombucha, a South London drinks company, said her business will be hit with more than £100,000 in extra costs next year, delaying its expected break-even point by at least 12 months. Momo uses glass bottles, a sustainable but heavier material that attracts higher charges under the new regime.
“There are hundreds of businesses that will go out of business,” Jewitt warned. “They just have no concept of how small businesses work in the UK.”
The sentiment is echoed across the industry. Liam White, co-founder of condiment maker Dr Will’s, said he may need to raise additional capital to cope with the added £35,000 cost burden. “It adds to the cocktail of things that keep you awake as a small business owner,” he said.
Despite mounting pressure, government advisers and compliance experts suggest companies should prepare for the new rules rather than expecting a reprieve. John Redmayne, managing director of the European Recycling Platform, said: “These regulations aren’t going to go away.”
The government maintains that the EPR scheme will create 21,000 jobs and drive £10 billion in recycling investment over the next decade. “We are committed to cracking down on waste and boosting recycling, with the extended producer responsibility for packaging being a vital first step for our packaging reforms,” a spokesperson said.
For many entrepreneurs, however, the immediate reality is a stark one: a sudden, costly burden that threatens to suffocate growth just as businesses are emerging from the challenges of Brexit, Covid-19 and inflation. “The government talks about economic growth,” said Maggi, “but what they’re doing is stifling the very entrepreneurs and small businesses that drive it.”
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Packaging tax could be ‘catastrophic’ for small food businesses, brands warn