BREXIT to Drive Up UK Plastic Packaging Costs

Abstract:

Increasing trade regulations between the EU and UK, scarcity of skilled labor, loss of competitiveness of local resin manufacturers, and decline in plastic recycling rates could all potentially affect the packaging industry, driving up the price of packaging in the UK. Food and beverages and the pharmaceutical industry are likely to be the most affected by increasing costs associated with a No-Deal BREXIT. This article explores key factors that could affect packaging costs and measures taken by packaging converters.

Introduction:

The British Parliament has set the extended BREXIT date to October 31, 2019, postponed from the previous deadline of March 31. The EU had pushed for a transition period for regulations and procedures to be modified and for companies to make the required modifications and ensure a smooth process. However, the chance of a No-Deal BREXIT has continued to escalate over the last few months. This would result in no grace period for companies, which would have to be ready to follow the modified regulations from Day 1. The plastic packaging industry looks to be one of the most affected industries, especially companies located in the UK.

Currently, about 70 percent of the overall UK plastics trade is with EU countries. This accounts for about €6.25 billion in exports and about €10 billion in imports. A No-Deal BREXIT could result in significant tariffs being added to the costs, apart from border crossing delays and additional certifications. Further, as the UK would become a “third country” with respect to the EU, dealers of plastic packaging in the UK would technically become importers, passing product liability on to importers and driving up their overheads.

Zero Tariffs on Resin Imports:

The UK is a major polypropylene exporter, but it also imports about 80 percent of its overall PP requirements from EU countries. The UK Parliament recently passed a moratorium effectively reducing tariffs on chemical and resin imports to 0.1 percent in the case of a No-Deal BREXIT, except for PET resin, which would attract a tariff of 6.5 percent. Though this effectively retains the current pricing of resins in the UK, the non-tariff regulatory issues and customs barriers associated with a No-Deal BREXIT will be disruptive to the overall packaging industry.