‘Recycling tax threatens to drive us out of business', warn pubs and restaurants
In a letter to the Prime Minister, hospitality companies warned that pushing ahead with an expanded levy on packaging will fail to boost recycling rates while fuelling price inflation and damaging the economy.
They accused Steve Reed, the Environment Secretary, of seeking to ram through the reforms 'far too quickly' and failing to pay 'due regard' to the damage it would cause to businesses that are already battling a tax raid by Rachel Reeves, the Chancellor.
The letter was signed by eight groups including UKHospitality, the British Beer and Pub Association, the Campaign for Real Ale, and British Glass.
Many hospitality venues say they are already on the brink following Ms Reeves's decision to increase employer National Insurance contributions, raise the minimum wage and cut business rates relief in April, which will cost the industry an estimated £3.4bn this year.
But under the so-called extended producer responsibility (EPR) levy, they are now threatened with a 'triple whammy' of costs in October worth millions of pounds.
This includes the direct impact of the levy itself, the costs they expect their suppliers to pass on, and what they already pay for commercial waste disposal, UKHospitality says.
Kate Nicholls, chief executive of UKHospitality, warned: 'You already have a third of outlets operating at or below break-even.
'Resilience is weak and margins have been squeezed until they are wafer thin. Another unnecessary tax will push many over the edge.
'Jobs and businesses are at risk and prices will inevitably rise.'
The EPR scheme will see food and drink companies charged a levy based on how many tonnes of packaging such as glass, aluminium and plastic goes into their products.
It is meant to change the way recycling is paid for, by making businesses contribute more towards the disposal of household waste that is currently handled by local councils.
In theory, that is meant to incentivise those businesses to reduce the amount of packaging they use overall.
But hospitality firms say the added costs will simply be passed on to them by their suppliers, and to supermarket shoppers through higher food prices.
Earlier this year, fast food chain Burger King and pub giants Fuller's, Marston's, Punch Pubs and Stonegate Group warned against the policy, claiming it would add £2,000 to the annual running costs of a typical large pub.
The British Retail Consortium has also estimated that the levy will add £2bn to the retail sector's costs.
In their letter to the Prime Minister and Chancellor, hospitality businesses said the policy was badly designed because it would effectively force them to 'pay twice' for recycling. Many already pay separately for waste disposal through commercial services.
The Department for Environment Food and Rural Affairs (Defra), which Mr Reed leads, has pledged to consult on potential exemptions for 'non-household waste' but that process is not expected to begin until later this year. It raises the prospect that firms will have to pay higher levies in the meantime.
Ms Nicholls warned that would be 'too late for too many firms'.
On Sunday, a source close to Mr Reed insisted the Environment Secretary remained committed to the reforms and claimed he had the backing of Sir Keir and Ms Reeves.
The reforms were repeatedly delayed under the previous government.
Defra was approached for comment. The department has repeatedly insisted that the final costs of EPR remain uncertain and are likely to change compared to current estimates.
It has claimed that the policy will help to reduce waste and boost recycling, and will stimulate £10bn of investment in domestic recycling, creating more than 20,000 jobs.
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The blue-chip index was up 0.3pc as gains in consumer and healthcare sectors offset losses in energy and mining stocks. The FTSE 250 mid-cap index dropped 0.4pc, putting it on pace to mark its steepest fall in over two weeks. The UK's consumer price inflation hit its highest in 18 months in July when it increased to 3.8pc from 3.6pc, once again leaving Britain with the fastest rate of price increases among the world's largest rich economies. Luke Bartholomew, deputy chief economist at Aberdeen, said: 'Inflation was always likely to rise today, but this report is definitely on the hotter side. 'In particular, services inflation, which the Bank of England watches very closely as a measure of underlying inflation pressure, popping higher will be a source of concern among policymakers.' Traders are now betting on a quarter-point reduction in March next year. Earlier this month, markets had anticipated a cut before the end of 2025. On the FTSE 100, BP dropped 1.3pc after it said operations at its refinery at Indiana were affected by flooding. On the flip side, consumer stocks and healthcare companies supported gains on the blue-chip index. Medical equipment maker Convatec rose 5.6pc was the largest gainer on the FTSE 100 after it announced $300m share buyback programme. 11:25 AM BST Tax raid forcing pubs and restaurants to close one day a week Rachel Reeves's tax raid is forcing hospitality businesses to shut their doors at least once a week as they grapple with spiralling wage costs following last year's Budget. On Wednesday, a new survey revealed that almost three quarters of hospitality businesses were operating at or below 85pc of their normal capacity, meaning they close for part of the week to save money. 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Here, Telegraph Money explains what your options are. 09:44 AM BST Rising inflation will keep borrowing costs high, warn economists The cost of government borrowing will rise as a result of higher inflation, economists have warned. Julian Jessop of the Institute of Economic Affairs said the news of inflation 'looks set to get even worse before it gets any better'. He said: 'The latest jump in UK inflation to 3.8pc in July was not a big surprise – the Bank of England was already expecting an increase to 4pc in September. 'But rising inflation will continue to eat into real incomes and keep bond yields high, adding to the government's cost of borrowing.' He added: 'The bigger picture is that UK inflation has continued to diverge from the euro area, where inflation has settled at around 2pc. 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The domestically focused FTSE 250 sank by 0.3pc to 21,770.37. 07:57 AM BST 'Oasis effect' helps drive up hotel prices A rise in the cost of overnight hotel stays helped drive services inflation during July as Oasis kicked off their reunion tour. Services inflation hit 5pc last month, also driven by a large increase in air fares. The figure was far higher than the jump from 4.7pc to 4.8pc that had been expected by economists and comes as the chancellor imposed higher costs on businesses through her tax raid. Economists had expected the reunion of Oasis for their first tour in 15 years to push up the costs of hotels and provide further fuel to inflation. Adam Deasy, economist at PwC, said: 'As expected, the summer seasonals drove the change: we saw large increases in airfares, likely due to school holidays, and hotel prices surged – possibly influenced by the 'Oasis effect'. 'This demonstrates the volatility that summer readings can bring and pushes inflation to an uncomfortable new peak since January 2024.' 'Despite recent falls in earnings growth, the Bank of England sees the all-important services inflation figure continuing to rise through the year, and the increase from 4.7pc to 5pc in July may indicate that it's right. 'This, together with higher-than-expected food inflation through much of 2025, looks poised to push inflation to a peak of 4pc later this year, double the Bank's 2pc target.' 07:42 AM BST Pound edges higher as hopes of September rate cut 'extinguished' The value of the pound increased after the stronger-than-expected inflation effectively ruled out the chances of a September interest rate cut. Sterling rose 0.2pc against the dollar to $1.351 and gained 0.2pc versus the euro to €1.161 after prices rose at a rate of 3.8pc in July, faster than projections of 3.7pc. Suren Thiru, economics director at ICAEW, said: 'July's outturn probably extinguishes hope of a September interest rate cut, while strengthening underlying inflationary pressures calls into question whether policymakers will be able to relax policy again this year.' He added: 'Increasing services inflation suggests that rising National Insurance and National Living Wage costs are exacerbating underlying price pressures by more than offsetting the current downward squeeze from looser labour market conditions. 'While spiralling business costs and food prices may mean that inflation peaks higher than the Bank of England's prediction of 4pc, it should start decelerating in the autumn as a weaker economy increasingly bears down on prices.' Monica George Michail, associate economist at Niesr, added: 'The Bank faces a difficult balancing act between lowering inflation and boosting a sluggish economy. 'Given that several of the current drivers of annual price increases are one-off policy changes, we think the Bank of England may look through them and cut interest rates one more time this year. 'However, there remain upside risks especially from food prices and sustained wage pressures, which will force the Bank to remain cautious' 07:35 AM BST Interest rates may not be cut until next year, warn economists The higher than expected rise in inflation to 3.8pc in July, from 3.6pc the previous month, makes life even more difficult for the Bank of England. Its nine-person rate-setter panel is already struggling to agree on the right diagnosis for the economy's ills. For the first time ever they were forced into a second round of voting in August, before ultimately agreeing to lower interest rates by 0.25 percentage points to 4pc. The latest figures will make their balancing act even more fraught. Inflation is rising faster than expected, but growth has been better than anticipated. Normally that would make policymakers err on the side of caution and swerve rate cuts. Among the drivers of inflation in July were airfares – worsened by how the school holidays fell – and hotel prices, likely affected by Oasis making a return. The rate setters may judge these are temporary factors and persist with cutting rates. But the risk of price rises proving stubborn will be a big concern. 'The risk is that inflation expectations and wage growth rise further and the next move down in rates does not happen until next year,' warns Ruth Gregory at Capital Economics. 07:27 AM BST Rail fares on track to jump by 5.8pc Regulated train fares in England may increase by 5.8pc next year, based on a measure of inflation announced today. The Office for National Statistics said Retail Price Index (RPI) inflation rose to 4.8pc in July. The Government has not confirmed how it will determine the cap on regulated fare rises in 2026, but this year's 4.6pc hike was one percentage point above RPI in July 2024. If that formula is used to set next year's fare increase, the cost of train travel will jump by 5.8pc. Pressure group Railfuture recently said 'it would be outrageous' if fares even rose by as much as 5.5pc. 07:19 AM BST Tories say rising inflation 'deeply worrying for families' Mel Stride, the shadow chancellor, said inflation jumping to its highest level in more than 18 months was 'deeply worrying for families'. He said: 'Labour's choices to tax jobs and ramp up borrowing are pushing up costs and stoking inflation – making everyday essentials more expensive. And with leading economists warning that the Chancellor has blown a colossal black hole in the public finances, families and businesses are bracing for yet more pain come the Autumn Budget.'Families are paying the price for Rachel Reeves' economic mismanagement. Britain can't afford Labour.' 07:16 AM BST Reeves admits 'more to do' as inflation jumps Rachel Reeves said there is 'more to do' to ease the cost of living after inflation jumped to its highest level since January last year. The chancellor said: 'We have taken the decisions needed to stabilise the public finances, and we're a long way from the double-digit inflation we saw under the previous government, but there's more to do to ease the cost of living. 'That's why we've raised the minimum wage, extended the £3 bus fare cap, expanded free school meals to over half a million more children, and are rolling out free breakfast clubs for every child in the country. 'Through our Plan for Change we're going further and faster to put more money in people's pockets.' 07:11 AM BST Air fares and petrol prices push up inflation ONS chief economist Grant Fitzner said: 'Inflation rose again this month to its highest annual rate since the beginning of last year. 'The main driver was a hefty increase in air fares, the largest July rise since collection of air fares changed from quarterly to monthly in 2001. 'This increase was likely due to the timing of this year's school holidays. 'The price of petrol and diesel also increased this month, compared with a drop this time last year. 'Food price inflation continues to climb, with items such as coffee, fresh orange juice, meat and chocolate seeing the biggest rises.' 07:06 AM BST Inflation jumps to 3.8pc The rate of inflation rose to 3.8pc in July from 3.6pc in June, the Office for National Statistics said. Transport, particularly air fares, made the largest upward contribution to the monthly change. 06:46 AM BST Oasis reunion could fuel inflation Prices in the UK are set to have risen faster last month as school holidays boosted travel costs and grocery bills remain elevated. However, some economists have said an 'Oasis bump' could have contributed to higher hotel and accommodation prices in July. Sanjay Raja, senior economist for Deutsche Bank, said this could partly be attributed to Oasis kicking off their reunion tour in July. The concerts brought in hordes of fans to arenas in Cardiff, Manchester, London and Edinburgh, which could have driven greater demand for hotel rooms. Accommodation prices could rise by as much as 9pc in July, compared with June, 'with the Oasis concerts having a strong impact on Manchester prices alone', Mr Raja said. He is predicting headline UK inflation will have risen to 3.8pc in July. 06:28 AM BST Good morning Thanks for joining me. Inflation has been forecast to have climbed from 3.6pc to 3.7pc in July. We will cover the data as it is released and what it means for you and the markets. Here is what you need to know. 5 things to start your day The tax traps Reeves must fix to grow the economy | Reforming the UK's flawed taxation system could provide a much-needed boost for the Chancellor Jeremy Warner: Reeves must take her share of the blame for rising inflation | Labour cannot keep forcing minimum wages higher if the cost is a surge in unemployment Rural council tax to rise by £380 under Rayner plan | Middle-class households face higher bills to help fund services in poorer neighbourhoods America the preferred destination as wealthy consider quitting Britain | Millionaires eye English-speaking countries and favourable tax rates amid fears of fresh Reeves raid JD Vance forced UK to drop demand for 'backdoor access' into iPhones | Home Office agrees to withdraw order seeking to force Apple to break its device encryption What happened overnight Global share markets came under pressure on Wednesday after a tech-led sell-off on Wall Street. Benchmarks fell in Japan, South Korea and Taiwan, pulled lower by selling of computer chip makers. Tokyo's benchmark Nikkei 225 declined 1.7pc to 42,787.28. Computer-chip equipment makers Advantest plunged 6.6pc and Disco dropped 4.7pc. Chip maker Tokyo Electron lost 1.9pc and Lasertec lost 1.8pc. Japan reported its exports fell slightly more than expected in July, pressured by higher tariffs on goods shipped to the US. South Korea's Kospi dropped 1.4pc to 3,096.09, while the Taiex in Taiwan fell 2.4pc after chip maker TSMC dropped 3.8pc. On Wall Street, falls in Nvidia and other heavyweight artificial intelligence stocks pulled the S&P 500 down 0.6pc, to 6,411.37. They also dragged down the Nasdaq by 1.5pc, to finish at 21,314.95. However, the blue-chip Dow Jones Industrial Average ended roughly flat, ending at 44,922.27, after briefly touching an all-time high. In the bond market, the yield on benchmark 10-year US Treasury notes fell to 4.314pc from 4.346pc late on Monday. 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Bloomberg
3 hours ago
- Bloomberg
UK Poised to Name Ex-China Diplomat as Deputy Security Adviser
The UK's former ambassador to China, Barbara Woodward, is expected to be named Keir Starmer's new deputy national security adviser, as the prime minister seeks to beef up his foreign policy team. Woodward, who is currently Britain's top diplomat to the United Nations in New York, is set to start her new position later this year, according to people familiar with the matter, who spoke on condition of anonymity about an appointment that hasn't yet been made public. Woodward in June narrowly missed out on becoming the first woman to head Britain's secret intelligence service MI6, having been shortlisted alongside eventual appointee Blaise Metreweli.
