Market Overview United Kingdom: Rising Prices Remain the Main Issue

With a gross domestic product of 2.23 trillion British pounds in 2022, the United Kingdom ranked fifth among the world's largest economies - behind the United States, China, Japan and Germany. However, it is now becoming difficult for the country to maintain this position. Brexit and the Corona pandemic have left their mark. For 2023, analysts therefore expect a minus of 0.3 percent in economic growth. Companies and consumers are feeling the effects of the economic situation primarily in the form of prices: The inflation rate rose rapidly towards the end of 2021 and reached a 41-year high of 11.1 percent in October 2022.

This is also affecting the packaging industry, which has to cope with lower consumer spending and higher material prices at the same time. The latter came mainly from disruptions in global supply chains related to covid lockdowns and the Ukraine war. UK packaging companies have had to adapt quickly and find local suppliers to replace cheaper Asian suppliers. With manufacturers sourcing large quantities of plastic packaging materials such as bags, films and containers from countries like China, this is no easy task and is driving up prices. Therefore, when asked what factors will influence packaging design and development over the next decade, 59 percent of companies cited cost in a survey conducted by the consulting firm Duo.

Market Environment: Turnover of £11 Billion and More than 85,000 Employees 

According to the Packaging Federation of the United Kingdom, the UK packaging industry has an annual turnover of around £11 billion and employs more than 85,000 people, which is three percent of the country's manufacturing workforce. The packaging industry is diversified across many companies, ranging from regionally active firms to global players. The largest companies in the UK packaging market are currently Amcor, DS Smith, Aptar Group, Sealed Air and Sonoco Products, according to Mordor Intelligence.

The majority of packaging volume is used in the retail sector, especially for food. According to Global Data figures, the UK food industry is the main consumer of packaging materials, with a share of 62.6 percent in 2021, followed by the beverage industry. Within the food industry, flexible packaging was the most commonly used packaging material, followed by rigid plastics. 

The demand for flexible packaging in the food industry is mainly due to the high demand for bakery products and cereals, confectionery and snacks, where consumers are primarily looking for convenience. This includes single-serve or portion-size packaging, resealable packaging and on-the-go packaging. 

Overall, however, the UK packaging market is shifting not only towards easy-to-use solutions, but also towards more sustainability - not least due to stricter regulatory requirements.

Stricter Legislation

One of the biggest changes facing the packaging industry is the UK government's plastic packaging tax, which came into force in April 2022. The tax affects all companies that produce or import more than ten tonnes of plastic packaging per year. Companies must either prove that their packaging consists of more than 30 percent recycled material or pay a tax of 200 pounds per tonne.

The Plastic Tax is not the only means by which the UK government regulates the packaging market. Extended Producer Responsibility (EPR) is a longer existing regulation that makes manufacturers more accountable for their products. Packaging has been subject to Packaging Regulations since 1997, the main purpose of which is to ensure that companies are collectively responsible for contributing to the costs of recycling and recovery of packaging.

Further legislation is also expected to increase recycling rates in the future: By 31 March 2026, for example, specific recyclability labelling will be required on packaging, and by 31 March 2027 for plastic films and flexible materials.

However, as the industry association PPMA points out, sustainable packaging and processing can contribute to cost savings and a reduction in the carbon footprint. If sustainable products and machines not only meet legal standards, but are also practical and cost-efficient, manufacturers can strengthen their competitiveness. In times of rapidly rising prices, however, this is a monumental task for the industry.