PACKAGING NIGHTMARE: Small Firms Buried Under Mountains Of New Green Red Tape

Britain’s small businesses say they are drowning in red tape as sweeping new packaging rules pile yet more costs and paperwork onto already struggling firms. Under the Government’s Extended Producer Responsibility reforms, businesses must now track and report huge amounts of packaging data while facing rising fees for materials deemed difficult to recycle. Ministers say the scheme will boost recycling and make polluters pay, but small firms warn the changes are creating a bureaucratic nightmare just as they are already battling soaring energy bills, wage rises, tax pressures and weak consumer demand. Critics fear the extra costs will ripple through supply chains and ultimately hit both small businesses and consumers.

Photo by Cloris Ying on Unsplash

Boxed in by the packaging rules

Businesses warn they’re drowning in increased costs and now higher fees for the Government’s major packaging reforms hit.

The UK’s small firms say they’re already buried under mountains of paperwork and that’s got worse thanks to sweeping packaging reforms that force them to report every scrap of packaging they use, from cardboard boxes to plastic wrap and bottle tops.

The Government’s Packaging Extended Producer Responsibility (EPR) rules have been phased in since 2023 and now higher fees for ‘bad’ packaging are beginning to hit. Business owners say it’s turning into a bureaucratic nightmare.

Under the previous system, costs were shared between producers and local authorities. Now, the financial burden has shifted almost entirely onto businesses. Businesses must pay the full net cost of dealing with the packaging waste they create, from collection to sorting to recycling. That’s a big shift in how packaging compliance works and even though it’s aimed at bigger businesses if has significant implications for small and micro-ones too.

WHAT’S CHANGED

Under the new system, companies must pay the full cost of dealing with the packaging waste they create. That means reporting, data collection, fees and admin. For many small firms that’s a real headache.

The Government says the reforms will boost recycling and cut waste. It may do, but it will add about £2bn to the exchequer. Businesses say it’s another cost piled on top of energy bills, wages, NICs and business rates. However, that cost is likely to end up being passed on to consumers and of course the micro businesses are the least able to increase their prices for fear of losing sales.

THE REPORTING RULES

Firms must now record:

• What packaging they use

• What it’s made of

• How much of it is recyclable

• Where it ends up

• Whether it is household or business waste

Even tiny businesses can get caught if they pass the thresholds.

According to Government guidance, businesses must collect and report packaging data if they:

• Have £1m+ turnover, and

• Supply or import more than 25 tonnes of packaging per year.

Small producers (turnover £1m–£2m and 25–50 tonnes of packaging) have reduced obligations, but they are still required to report data. Micro businesses below these thresholds are generally exempt, but many small firms are caught by the rules.

THE TIMELINE

2023–2024: For the past 2 years businesses have had to gather detailed packaging data.

2024: Mandatory reporting has meant that companies must submit full packaging reports to the regulator. Missing the deadline for reports means facing fines.

2025: The fees kicked in last year. Producers have been paying the full net cost of managing household packaging waste.

2026 and beyond: There are now higher Fees for “Bad” packaging. Non‑recyclable or hard‑to‑recycle materials will attract much higher charges. Expect costs to rise for:

• Black plastic

• Multi‑layer packaging

• Composite materials

• Anything that can’t be easily recycled

SMALL FIRMS SAY THEY’RE BEING SQUEEZED

While big brands can hire compliance teams, small and micro businesses say they’re being left to fend for themselves, and the rules are overly complex and costly.

Many warn:

• Packaging suppliers are already hiking prices

• Admin time is exploding

• Cashflow is tightening

• They may have to ditch certain products entirely

THE GOVERNMENT’S DEFENCE

Ministers say the reforms:

• Cut waste

• Boost recycling

• Make polluters pay

• Modernise the system

• Reduce costs for councils

Critics say the scheme is confusing, rushed and punishing the wrong people. Small businesses are already battling soaring costs from all directions. Now many are packaging accountants too and say that unless the Government simplifies the system, or delays the fees, the reforms could be their final straw.

Details of the Packaging Extended Producer Responsibility (pEPR)

This is the UK’s new system for making businesses pay the full net cost of dealing with the packaging waste they create, from collection to sorting to recycling. It represents a major shift in how packaging compliance works and will have significant implications for small and micro businesses.

1. What Packaging Extended Producer Responsibility Actually Is

Under the new pEPR regime, producers must fund the entire cost of managing household packaging waste, including:

• Collection

• Sorting

• Treatment and recycling

This is a major change from the old system, where costs were shared between producers and local authorities. Now, the financial burden shifts almost entirely onto businesses.

The regime also requires far more detailed reporting, including:

• Packaging material

• Packaging function

• Packaging use

• Recyclability (which will influence future fees)

This data determines the fees businesses will pay.

2. Who Must Comply?

According to Government guidance, businesses must collect and report packaging data if they:

• Have £1m+ turnover, and

• Supply or import more than 25 tonnes of packaging per year.

Small producers (turnover £1m–£2m and 25–50 tonnes of packaging) have reduced obligations, but they are still required to report data.

Micro businesses below these thresholds are generally exempt, but many small firms will still be caught by the rules.

3. How pEPR Will Affect Small and Micro Businesses

Even though the regime is aimed at larger producers, small and micro businesses will feel the impact in three major ways:

A) Higher Costs Passed Down the Supply Chain

Industry analysis shows that pEPR is already increasing costs for producers, and these costs are being passed through the supply chain, including to small retailers, food producers, and hospitality businesses. One report notes that roughly four-fifths of EPR costs are passed directly to consumers, with smaller producers among the most exposed.

Small businesses may face:

• Higher prices for packaging

• Higher prices for packaged goods

• Increased supplier charges

• Reduced margins

B) More Administrative and Reporting Burdens

Small producers must now:

• Collect detailed packaging data

• Report annually

• Track materials and recyclability

• Potentially join compliance schemes

This is a significant administrative burden for small firms with limited staff capacity. The new reporting requirements are far more granular than the previous system.

C) Increased Disposal Fees in Future

Because fees will be linked to recyclability, small businesses using:

• Composite packaging

• Non‑recyclable plastics

• Multi‑layer materials

…will face higher charges.

This could force small firms to redesign packaging — often at considerable cost.

4. Why This Matters for Small and Micro Businesses

1. Margins will tighten

Small firms already face rising energy, labour, and tax costs. pEPR adds another layer of pressure.

2. Cashflow will be hit

Higher packaging costs and compliance fees reduce working capital — a major issue for micro businesses.

3. Supply chain fragility increases

If larger producers pass on costs or change packaging formats, small firms must adapt quickly.

4. Competitive disadvantage

Large firms can absorb compliance costs or redesign packaging. Small firms cannot.

5. The Bigger Picture: Why pEPR Exists

The aim is to:

• Reduce waste

• Improve recycling

• Make producers responsible for environmental impact

• Fund local authority recycling systems

But the design means small businesses will feel the effects indirectly, even if they are not the primary target.

6. What Small and Micro Businesses Should Do Now

1. Check if you are obligated

Use the Government thresholds.

2. Start collecting packaging data

Even if you are not obligated yet, suppliers may require it.

3. Review packaging choices

Switch to recyclable materials where possible to avoid future cost penalties.

4. Speak to suppliers

Understand how they plan to pass on pEPR costs.

5. Consider joining a compliance scheme

This can reduce admin burden.

Summary

Packaging Extended Producer Responsibility is a major regulatory shift that requires producers to pay the full cost of managing packaging waste. For small and micro businesses, the impact will come through:

• Higher packaging and supply chain costs

• Increased administrative requirements

• Future recyclability‑linked fees

It is essential for small firms to understand their obligations early and prepare for rising costs and reporting demands.