From October 1, a new layer of cost landed for any businesses in Gloucestershire which makes packaging or uses it in their products.

And according to a key Gloucestershire firm caught in the new paperwork, the change shows an "alarming disregard" for SMEs.

The Extended Producer Responsibility (EPR) scheme marks the awaited arrival of law legislated back in the 2021 Enviromental Act under then DEFRA Minister George Eustace and it obligates firms across the activity of making, importing and selling to report their packaging data - and stump up consequent new fees.

These fees, on top of the Plastic Packaging Tax which became effective in 2022, are now eligible for firms with an annual turnover of more than £1m and which produce more than 25 tonnes of packaging handled in a calendar year.

The government's invoice for activity from these firms is set to cover the full cost of collecting, sorting, recycling and disposing of a product's end-of-life cost, while the fees will taper, based on the specific packaging recyclability used by eligible companies. Initial rates set for the first financial year are £196/tonne for paper/card and £423/tonne for plastic.

For those who are not in an eligible business for this incoming cost, the issue may read like something to file in the bin, but early warnings have already emerged - not least from the Bank of England - that this will not only be an incoming financial pressure for specific firms but is also be a factor for consumers in the thorny issue of food price inflation.

With the issue firmly on its radar in its August monetary report, the BoE said that it not only expected the change to manifested in food price rises (which it predicts as climbing to an overall anticipated 5.5% in the rest of 2025), but that manufacturers were already pushing the anticipated cost through to the end user.

The Bank's report stated: "The Environment Act 2021 introduced the EPR framework for packaging to help the UK achieve its environmental goals. This framework transfers the costs of packaging waste management from local government to the businesses that produce the packaging."

By placing these costs on producers, the policy seeks to incentivise reductions in the use of packaging materials and encourage recycling, the Bank added, all affected firms being due to receive their first EPR invoices in October.

WIth a similar packaging waste regulation now introduced in the EU to come into force in August 2026, the bank predicted the move may also push up prices for food from across the Channel next year.

The Bank said: "Because packaging costs represent a higher share of food and drinks costs compared with many other goods, the packaging levy is expected to affect CPI inflation mostly via food prices. Bank staff estimate that the scheme could add a little over 0.5% to the level of food prices if these costs were fully passed through to consumers."

The British Retail Consortium (BRC), meanwhile, is more stark in its reaction, saying that it has research to show how more than 80% of DEFRA's levy will simply go straight to the supermarket checkout, while shifting an increased burden on retailers and households.

The BRC said: "Following last year's Budget, where retailers were hit with £5bn 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. 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."

In addition to the financial impact, 85% of retailers have told the BRC that 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."

Ahead of EPR, the BRC also suggests that the desired green direction of travel among retailers is already evident, with cited survey findings showing how 85% of retailers intend to increase the proportion of sustainable packaging placed on the market, while almost four in five (78%) intend to reduce their total volume of packaging.

With the latest levy now activated, the BRC is calling for Westminster to ringfence the funds raised to ensure the money can be used only 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, said: "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."

DEFRA's remains insistant however, that the change will enhance the green economy by stimulating demand for skilled green jobs while the consumer gets more sustainable and easily recyclable products which are fed back into a more efficient waste management system.

Its explainer for the scheme sets out how the levy works "in lockstep" with two other significant incoming reforms: simpler recycling collections for bins in England, and the deposit return scheme for drinks containers.

The levy for firms works by charging fees to firms using packaging in order to meet the costs of collecting and recycling it, DEFRA said, while from year two, it will introduce "modulation where the costs are higher for hard-to-recycle materials". Where packaging can be reused or refilled, fees will remain lower.

DEFRA added: "This will encourage businesses to reduce the amount of packaging they use, shift to more recyclable materials and design new products that can be recycled and reused more easily, stopping waste from going to the nation's landfills or incinerators.

Steel, aluminium and PET plastic drinks containers across the UK are not charged under the scheme, as they will be covered under the UK's Deposit Return Scheme.

How might this play out in Gloucestershire?

Punchline-Gloucester.com sat down with a packaging firm based in Gloucestershire to discuss the extent of the new levy. 

The business was keen to share its perspective on the issue, but prefaced its views with a priviso that "due to the current political environment and concerns about regulatory scrutiny, we cannot be publicly named as criticising environmental taxes". In this context, we have therefore preserved the anonymity of this firm.

The firm's views, however, are scathing of DEFRA's initiative, warning that the implementation "demonstrates alarming disregard for how small businesses operate in competitive global markets."

They said: "Small and medium-sized enterprises employ 60% of the UK workforce and account for over 99% of all businesses, yet our company, with just three non-production staff members, faces the same compliance burden as multinational corporations with dedicated teams many times larger than our entire workforce."

Registration costs alone, they said, reach £2,620 for large producers and £1,216 for small producers, but because DEFRA has calibrated these costs so they are only marginally more expensive than using compliance schemes (£1,685 and £631 respectively), it has created an artificial market for intermediary services.

"These compliance schemes typically charge additional service fees for managing obligations on behalf of businesses, adding another margin to cover whilst contributing zero actual value. This has spawned an entire parasitic industry of environmental compliance consultancies that exists solely to navigate the government's own poorly implemented compliance schemes."

They added: "These are precisely the kind of unproductive service sectors that contribute to the UK's serious productivity failures."

The scheme was not thought through on implementation, our source said, given that it requires data that many businesses have no reasonable means to obtain: "The regulations require us to classify packaging by its end-of-life destination—household versus commercial waste—but as converters 4-5 companies removed from the consumer, we have no visibility into whether our flexible packaging will wrap a sandwich sold in Tesco or used in an industrial catering environment.

"The same roll of film leaving our Gloucestershire facility can serve both purposes. We're effectively required to report data we cannot possibly obtain. The regulations tax the material if we cannot prove otherwise, creating a perverse incentive for inaccurate over-reporting to avoid penalties. This virtually guarantees inaccurate reporting, rendering the entire system ineffective—a classic case of good intentions failing upon contact with practical reality."

The firm's reaction to the levy amounts to a damning dossier, which includes these key claims:

● SMEs already spend 25 days per year tied up in regulatory admin, with total 55% saying the time spent is a handbrake on growth.

● Local impact will be tangible because the cost has to be "passed down supply chains and ultimately show up in food prices at supermarkets across Gloucestershire".

● Ultimately, rather than improving environmental outcomes, these measures risk pushing UK manufacturing abroad to jurisdictions operating under much less environmental scrutiny, which "results in increased transportation costs and carbon emissions, while shifting environmental damage rather than reducing it".

They added: Businesses don't add packaging for the sake of it—it's a legal requirement that keeps consumers informed and safe. There's already an intrinsic cost factor to using "extra" packaging; it's not free."

While it believed that the "polluter pays" priciple has merit, the firm concluded: "If the objective is reducing carbon impact, these policies may represent a spectacular failure."