26-05-2025
‘Recycling tax threatens to drive us out of business', warn pubs and restaurants
Sir Keir Starmer has been urged to delay the introduction of a controversial eco levy amid fears that the tax raid will push struggling pubs, hotels and restaurants out of business.
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.
