The UK Packaging Market is Facing Challenges

The UK packaging market is on an upward trend and, according to Mordor Intelligence, will grow from USD 58.27 billion in 2023 to USD 65.18 billion in 2028, which corresponds to a growth rate of 2.27 %. This increase will be driven by robust manufacturing activities fuelling demand for innovative packaging and labelling solutions.

The packaging sector is a major player in the country's economy, generating an annual turnover of around £11 billion ($13.6 billion), according to the Packaging Federation. The industry employs more than 85,000 people, which equates to three per cent of the manufacturing workforce. 

The increase in e-commerce and the rising demand for sustainable and recyclable packaging in the food and beverage sector are driving market growth. The industry is also experiencing rising demand for personalised products and a booming industrial packaging sector.

Food and Beverage as Growth Drivers

In the dynamic landscape of the UK packaging market, the food segment is proving to be a key growth driver. The increasing demand for processed foods and the trend towards lightweight, flexible packaging are changing market trends in the long term. The frozen food packaging sector in particular is experiencing a surge in demand, driven by changing consumer lifestyles that favour quality and convenience.

The bottle segment, particularly plastic bottles, has a significant share of the UK packaging market. The high consumption of soft drinks in the UK, as confirmed by figures from the Union of European Soft Drinks Associations and the British Soft Drinks Association, is driving continued demand for plastic bottles. Companies are currently focussing on improving the recyclability of bottles, following the general industry trend towards sustainable packaging solutions. This also applies to the food industry in general. 

Brands and retailers are increasingly focussing on reducing plastic waste and steering the packaging sector towards innovative and environmentally friendly solutions, according to Mintel's market researchers. However, this green shift is not without its challenges. The current climate of rising consumer prices is causing some brands to question their timetables for reducing plastic packaging. This is because the cost to customers is a major factor, requiring a difficult balancing act between sustainability goals and financial feasibility.

Nevertheless, a clear change can be observed in the food packaging market. Paper and cardboard packaging, which traditionally dominate the market, have further consolidated their position. From a market share of 49 % in 2018, it has jumped to 54 % in 2022. This increase confirms an industry trend towards materials that are perceived as more sustainable and environmentally friendly. In addition, there are regulatory changes that are intended to ensure more environmentally friendly packaging and reduce packaging waste.

Regulatory Framework Conditions

The tax on plastic packaging introduced by the UK government in April 2022 targets plastic packaging with a recycled content of less than 30 % and levies a tax of £200 per tonne. The aim is to promote sustainable packaging solutions. 

In a further step towards environmental responsibility, the United Kingdom introduced the Packaging Waste Regulations on 28 February 2023. It obliges manufacturers to record and report data on the type and quantity of packaging they place on the market. These figures form the basis for calculating the fees under the planned Extended Producer Responsibility (EPR) system, which is due to be launched in 2024.

The EPR is intended to make producers more responsible by making them bear the costs for the collection and disposal of their packaging. Politicians hope that this will create incentives to minimise packaging consumption and improve recyclability.

This measure affects a wide range of businesses within the packaging supply chain, including importers, retailers and online marketplaces. The scope of this scheme goes beyond the UK tax on plastic packaging and includes various packaging materials.

Waste Statistics Stagnating

The Department for Environment, Food and Rural Affairs (Defra) recently published the UK's waste statistics for 2021, which paint a nuanced picture of the country's recycling efforts. The key figures show a slight increase in household recycling rates from 44.4 % in 2020 to 44.6 % in 2021. This increase is modest but not uniform across the UK; while there are improvements in England, Scotland and Wales, there is a decrease in Northern Ireland. Meanwhile, the recycling rate for packaging waste has stagnated at around 63 %.

Looking at the individual materials, paper and cardboard lead the list of packaging waste with a recycling rate of 70.6 %. This was closely followed by metals and glass, which had a high recycling efficiency. Plastic waste was far behind at 44.2 %, which shows that there is still considerable room for improvement here.