Glass Industry Warns of £500m Investment Halt as UK Packaging Levy Drives Up Costs

Spanish-owned Encirc, one of the UK’s largest glass bottle manufacturers, is reportedly preparing to scrap a £500m furnace upgrade amid growing concern over the government’s packaging levy, known as the Extended Producer Responsibility (EPR) scheme. The decision comes as ministers confirm they will not back down on the policy despite warnings it is feeding inflation and discouraging industrial investment.

The EPR regime, valued at around £2bn, requires food producers, retailers and online businesses to pay fees on packaging placed on the market. Industry figures estimate that roughly 80% of the cost is ultimately passed on to consumers, leading to what businesses have described as a “stealth tax” on household shopping. For an average UK family, the charge is estimated at about £50 per year, with further increases expected as fees on items such as cartons, cups and plastic packaging rise in the coming months.

Officials at the Department for Environment, Food and Rural Affairs have made clear there will be no reversal of the policy, despite mounting pressure from manufacturers and retailers. The Bank of England has previously warned that the scheme is already contributing around 0.5 percentage points to food inflation and could push headline inflation higher over the next two years.

Local authorities are among the main beneficiaries of the levy, with funding intended to improve recycling infrastructure. However, the revenue is not ring-fenced, allowing councils to divert funds to other services such as social care and education. This flexibility has strengthened political support for the scheme, even as businesses raise concerns over its wider economic impact.

The glass sector has been among the hardest hit. Although glass accounts for only a small share of packaging by volume, it contributes a disproportionate share of EPR costs due to weight-based charging. Industry estimates suggest glass producers pay around 27% of total fees while representing just 5% of packaging output.

Encirc, which operates facilities across the UK and produces billions of bottles annually for major drinks brands, is now understood to be reconsidering major investment plans. Its parent company Vidrala is reportedly reviewing whether to proceed with a £500m upgrade aimed at improving energy efficiency and supporting net zero targets.

British Glass, the industry body, warned that the policy is already driving production decline and discouraging investment. It said most UK glass plants are foreign-owned, meaning future capital decisions are increasingly made outside Britain.

Supermarkets have also raised concerns, with one major retailer estimating that the levy will significantly increase operating costs, even after partial pass-through to consumers. Smaller food producers are said to be under particular pressure, with some warning that product lines may be reformulated or withdrawn entirely to reduce packaging costs.

The government maintains the scheme is essential to shift recycling costs away from taxpayers and claims it will support long-term environmental and employment goals. However, with inflation still elevated and manufacturers warning of reduced investment, debate over the policy’s economic impact is expected to intensify in the months ahead.