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With Britain exiting the European Union (EU) and the China ban on imports of some types of foreign waste from January 2017, the UK could now face challenges in maintaining its current household recycling rate (44%) and increasing it further (55% by 2025, 60% by 2030 and 65% by 2035), as recently agreed in the four legislative proposals of the waste package reached with the European Parliament in December 2017. Any change in a trade agreement could have a relevant impact on both the UK and European waste management industries.

EU leaders formally approved the Brexit transition deal at the March 2018 EU summit and adopted the guidelines on the framework for a future relationship with the UK. The EU is seeking a Free Trade Agreement to cover goods and a close partnership regarding security, defence and foreign policy. In the UK, uncertainty over what future relations with the EU will look like has continued, with the government divided between the two options of a Customs Partnership and Maximum Facilitation. With no solution yet over the Irish border question and a delay in the UK government’s White Paper detailing its final proposal for a future relationship, time to negotiate a deal is running out.

Euromonitor International’s Brexit Scenarios Tool houses our various macro scenarios to analyse the impact on the UK economy, industries and consumers.

Source: Euromonitor International

The delay in getting to the first Brexit milestone and the limited time left to come to an agreement that all member states will ratify means the most plausible option (with a 55-65% probability) is a Delayed Free Trade Agreement (FTA) likely to be reached in 2020. However, a No-Deal Brexit remains plausible with a 25-35% probability. Waste management companies must be prepared for both scenarios. With the UK being one of the European Union’s top waste exporters, the risk of future waste trade barriers with the EU in case of a No-Deal scenario might favour waste exports to cheaper destinations with lower environmental standards.

An opportunity for the UK recycling industry

Waste management in the UK has been shaped by European directives such as the Landfill Directive approved in 1999, with an impressive reduction in the proportion of municipal waste sent to landfill and a gradual increase in recycled waste. Although recycling rates of municipal waste, which includes composting, are now in plateau in the UK, they showed a 33.3 percentage point increase over the period 2000-2017, with per capita recycling rates very close to the European average and per capita landfill currently below the European rate.

Source: Euromonitor International from OECD

UK recycling rates are very dependent on exports with half a million tonnes of plastic waste and one and a half million tonnes of recovered paper sent to China every year, according to the UK Recycling Association. In addition to this, above three million tonnes of non-recyclable waste are sent to Europe every year to be converted into energy from waste. These exports are a clear indication of the gap between the amount of waste collected in the UK and the current capacity to treat it.

Waste Industry Response

Although Brexit could be seen as an opportunity to embrace more ambitious targets than those proposed in Europe, it is not clear how the country is planning to do it. No longer able to rely upon waste exports to China and with potential taxes on exports to Europe, the current recycling facilities in the UK are not likely to be able to absorb all the waste piling up at recycling plants.

While there are investment opportunities to build up the necessary recycling infrastructure, post-Brexit waste policy uncertainty puts the sector in a difficult position to take decisions or make investments. The shortage of recycling capacity makes waste-to-energy more attractive to investors as a convenient solution to the waste problem. However, this might bring some challenges in achieving the recycling targets proposed by the EU in the Circular Economy Package of December 2017 that the UK seems willing to follow before the end of the two-year Brexit process.

As Brexit negotiations continue, the government has announced some of its green Brexit policy strategies that are expected to boost recycling rates, such as the 25 year Environmental Plan, the UK Plastics Pact, as well as initiatives like the Latte Levy for disposable coffee cups, the bottles return scheme and the potential ban on plastic straws. Although these are steps in the right direction, the UK needs to rethink its legislation to increase demand for recyclable materials and incentivize private investment in recycling which is key in the transition towards a low carbon circular economy.

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