A new tax which forces retailers to pay for materials such as plastic used in packaging could make food and drink more expensive.
A new tax which forces retailers to pay for materials such as plastic used in packaging could mean even higher food prices for British consumers.
Environmentalists have welcomed the introduction of the extended producer responsibility (EPR), which will mean more cash for councils to increase the amount of plastics and other goods that are recycled in the UK.
But industry groups such as the British Retail Consortium have warned that up to 80% of the costs of new levy will be passed on to consumers - and could lead to food inflation.
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The tax comes into effect this month (October) and requires manufacturers to cover the costs of recycling and collecting packaging. In effect, it will mean that councils will be paid by retailers that use plastic to recycle more of their products.
Yahoo News spoke to experts about the likely impact of the new rules.
Businesses which supply or import packaging will need to report how much they import or produce to the government, and pay fees based on that.
This only applies to businesses that have a turnover of £1m or more and have imported or supplied more than 25 tonnes of packaging in the past year.
Businesses will need to pay a waste management fee under the scheme, which goes to councils to fund improved recycling schemes.
Business organisations in the UK say that the scheme will cost UK businesses up to £1.4bn per year.
Industry associations relating to food, drink and retail have said that the costs are expensive, and will hit businesss still reeling from increases in national insurance contributions.
The Food and Drink Federation forecasts this could mean food and drink inflation will hit 6% by December 2025 - pointing out that food and drink prices have already risen 40% in the last five years.
Jim Bligh, director of corporate affairs and packaging at The Food and Drink Federation (FDF), told Yahoo News: "Food and drink manufacturers support the extended producer responsibility scheme as a way to create a truly circular economy and boost recycling rates here in the UK.
"But the scheme is expensive, costing producers £1.4bn a year.
"With this cost coming at the same time as other regulatory pressures, like changes to employer national insurance contributions, as well as high energy and ingredient prices, businesses are left with no choice but to pass some costs on to shoppers at the till.
Read more: Will England cope with a huge increase in plastic recycling?
"That's why it's so important that the EPR scheme delivers the environmental benefits it promises and that costs don't creep up in coming years. This means ensuring that this £1.4bn investment from businesses is used to improve recycling rates."
The British Retail Consortium (BRC) has also warned that EPR will place a "significant financial burden" both on retailers and households.
It added that retailers have already been hit with £5bn in extra employment costs due to higher employer national insurance and rising national living wages.
The EPR will not only cost industry billions, but adds an administrative burden to retailers, who have to report extensively about the packaging they use, it said.
The BRC added that the government needs to ensure that all funds from the EPR are used for local recycling and to boost local recycling systems.
Andrew Opie, director of food & sustainability at the BRC, said: "Retailers support the polluter pays principle and are making significant changes to reduce and improve their packaging. But the packaging tax is also a multi-billion pound levy being paid by consumers during a cost-of-living crisis.
"They will ask: 'What are we getting for higher prices?' Unless funds are spent transparently and effectively, EPR threatens to just be another burden on an already overtaxed industry with no tangible benefits for customers or the environment."
The BRC said that retailers are responding to the tax, with 85% of retailers intending to increase the proportion of sustainable packaging placed on the market
Almost four in five retailers (78%) intend to reduce the total volume of packaging they place on the market.
Extended producer responsibility will pave the way for a big expansion of what can and cannot be recycled in the UK in 2027. This includes 'flexible' plastics, i.e. wrappers for many foodstuffs.
Read more: How new recycling rules around 'scrunchable' plastic wrappings will affect you
Environmental campaigners have welcomed the change, meaning that councils have the funding necessary to expand collections in 2027.
James Piper, co-host of the Talking Rubbish podcast, told Yahoo News: "Brands are going to pay into a big pot and it is passed on to councils to cover the costs of collections. So the government can now introduce these kinds of things when they say, 'Okay, you now need to collect flexible plastics, because it will be funded by extended produce responsibility.'"
"So it's not like councils are picking up the bill for that. So brands want to see flexible blasts collected and recycled, and they are going to be the ones paying the bill."