Final EPR fees published: Impact on businesses

What’s happening?

Defra has announced finalised fees for Year One (2025-26) of the Extended Producer Responsibility (EPR) scheme.

Until now, local authorities footed the recycling bill. From October, UK businesses will get their first invoices based on their 2024 packaging volumes, with just 3 months to pay up.

Why it matters: Business budgets take a hit

EPR is intended to shift this financial burden towards businesses and – hopefully – provide financial incentives to reduce the negative impact of packaging.

New fees create new cost pressure, especially for food and drink firms who generate most of the UK’s household packaging waste.

The table below shows that many fees are lower than previously forecast. Even so, businesses in the UK will face new significant costs. Timing was signalled in advance, but there is only a short time between publication of finalised fees and the deadline for payment.

Material	EPR illustrative base fee (£ per tonne) Previous version	EPR illustrative base fee (£ per tonne) Final version
Aluminium	435	266
Fibre composite	455	461
Glass	240	192
Paper and card	215	196
Plastic	485	423
Steel	305	259
Wood	320	280
Other	280	259

Source: Defra, June 2025

Food and drink businesses account for a large proportion of household packaging waste so they will be highly exposed.

Margins are already under pressure, so it is likely that much of the cost will be passed on to shoppers, creating food price inflation in 2025 and - possibly - in later years too. This will be broad-based, probably covering all food and drink product categories to some extent.

The Deposit Return Scheme (DRS) will also be inflationary when it arrives, although this is more likely to be a one-off inflationary “hit”, unless fees are updated later. DRS will cover only certain types of drink packaging.

What next? A more complex system ahead

This is just phase one. From 2026, “modulated” fees will be introduced which will create additional complexity, with different fee levels for each type of material, according to recyclability.

This will be assessed according to the Recycling Assessment Methodology (RAM), and Defra has now shared the structure for modulated fees for the next three years. Materials classed as ‘red’ will be subject to fees at double the rate of the base fee by 2029 – which could exacerbate inflationary pressures if businesses do not switch packaging materials.

Work is also underway to appoint a new Producer Responsibility Organisation (PRO) to operate within the EPR scheme, and to agree what powers this new body should have.

The government reiterated in the Spending Review that EPR fees would go to local authorities in their entirety, but the PRO could play a role in directing how funds are spent, as well as in setting future fees.

Once DRS begins in October 2027, most single use drinks containers will become exempt from EPR fees.

Defra’s work on its Circular Economy Taskforce continues, with it set to report in the Autumn. It will be important for priorities within the Circular Economy Strategy to align with those in the Food Strategy.

Issues to overcome

EPR is not unique to the UK – other countries have similar systems. However, to get the intended benefits, system design is critical.

Under the current version of EPR, there is no  built-in incentive for local authorities to improve recycling infrastructure.

In fact, with money being provided from EPR with few conditions attached, this risks inertia rather than action.

This year at least, there is no incentive for packaging producers to create more recyclable items, although this will hopefully change from Year Two onwards, if Modulated Fees are calibrated correctly.

Finally, reusable packaging may be penalised, despite sustainability goals. The current version of EPR still charges a fee for reusable packaging the first time it is placed on the market. Due to the need for durability, this is often heavier than disposable packaging of the same type, so the fee is likely to be much higher and comes in addition to the costs associated with collecting, cleaning and reusing containers.

Inflation watch: EPR and the rising cost of groceries

New EPR fees is one of the forces which will influence food and drink inflation in 2025. This will be accounted for in IGD’s latest retail food and drink inflation forecast. Get the insights first when the new Viewpoint report is published later this month. Sign up now to stay ahead.