Food bills set to climb as ministers refuse to ditch 2bn packaging levy

Spanish-owned Encirc may withdraw a £500m furnace upgrade as the UK government presses ahead with the Extended Producer Responsibility (EPR) packaging levy. Defra officials have indicated there will be no change despite evidence that the scheme increases food inflation and discourages investment in British manufacturing. Households are expected to face further price rises because about four-fifths of the EPR costs are passed through to consumers. The average household cost is estimated at around £50 per year, with later increases for coffee cups, soup pots, juice cartons, and plastic packaging. The Bank of England has linked EPR to roughly half a percentage point of food inflation and warned CPI could reach 6.2% by early 2027, with food inflation up to 7%. Fertiliser export disruption from the Middle East may worsen pressures on key produce supply chains.

"Households can expect a fresh round of price rises at the supermarket after ministers confirmed they will press ahead with the Extended Producer Responsibility (EPR) regime, the £2 billion packaging levy that food producers, brand owners and online retailers must pay on every item of packaging they place on the UK market."

"Roughly four-fifths of the EPR bill is passed straight through to consumers, which is why insiders have taken to calling it a "shopping stealth tax". The cost to the average UK household is estimated at around £50 a year - a figure that will edge higher when fees on coffee cups, soup pots and juice cartons rise by an average of 19 per cent later this year, with charges on plastic packaging up by 15 per cent."

"The Bank of England has already attributed around half a percentage point of food inflation directly to EPR, and warned in its most recent Monetary Policy Report that headline CPI could touch 6.2 per cent by the start of 2027, with food inflation running as high as 7 per cent. Disruption to fertiliser exports from the Middle East - particularly painful for the tomato, cucumber and lettuce supply chain - will only sharpen the squeeze."

"Senior officials at the Department for Environment, Food and Rural Affairs (Defra) have told industry leaders in recent days that there will be no climbdown, despite mounting evidence that the scheme is stoking food inflation and chilling investment in British manufacturing. The decision lands at a particularly awkward moment for shoppers, who are already absorbing the supermarket fallout from the Iran-US conflict."

Read at Business Matters