The REA, which represents a string of organics recyclers, says its members face a real risk of having to make staff redundant or even cease trading entirely as a result of increased costs.
In 2020, the government said it would reduce the list of businesses entitled to use red diesel, which many operators use to power machinery, from April 2022.
As part of the REA’s statement, Aberdeen-based Keenan Recycling said the removal of the lower rate of fuel will cost it £300,000 a year, and if councils are unwilling to accept a rise in rates, “we will have to consider letting staff go to manage this cost.”
The Shorts Group, which operates throughout Berkshire, Buckinghamshire, and Surrey, said the changes will cost it £500,000 a year which “inevitably” will see staff levels impacted as the cost couldn’t be covered by price rises.
Competition
The REA warned that the policy will “create unfair competition” because agriculture and horticulture sectors remain eligible for red diesel, meaning some on-farm AD and composting sites will be able to charge lower gate fees for accepting waste than off-farm sites who cannot.
The waste sector is set to lose the entitlement to use rebated fuel (red diesel) from 1 April, a move which the REA says “would likely see already razor thin profit margins evaporate, resulting in businesses having to make redundancies or cease trade entirely.”
Without an alternative to diesel currently available to the organic recycling sector, the association added that the change will “dramatically increase costs to businesses whilst simultaneously failing to deliver the intended environmental benefits.”
The REA and its members are calling on the Government to postpone the proposed change to red diesel policy for five years until 2027, when they hope there will be a viable alternative to diesel in the organics recycling industry.
Jobs and businesses are on the line
- Jenny Grant, REA
‘Business on the line’
Jenny Grant, head of organics and natural capital at the REA, said: “ Removing the organics recycling sector’s entitlement to use red diesel at this time would add an unacceptable and unaffordable financial burden on businesses which are already facing a perfect storm of worsening cost pressures.
“That is why we are urging the government to delay the proposed reform to red diesel policy for five years until 2027 to enable the development of viable alternative-fuelled vehicles and machinery.
“The Government must postpone this change – jobs and businesses are on the line.”
Calls
In a last-ditch effort to get the Treasury to alter its plans, a string of waste sector companies and associations have recently written to the Chancellor, Rishi Sunak, voicing concerns.
Most recently metal recycling company Ward outlined that some in the sector with fixed contracts will go into liquidation. In a letter to Rishi Sunak, operations director Donald Ward said that with gas prices “spiralling” after Russia’s invasion of Ukraine, support should be “leveraged” to the industry (see letsrecycle.com story).
Skip hire trade association UROC also wrote to Mr Sunak earlier this month, saying the landscape is “incredibly different now to when the policy change to remove the entitlement to use rebated fuel was announced” (see letsrecycle.com story).
Alongside rising fuel prices, the price of red diesel has also recently risen to near-record levels, with prices around £1.40 a litre.
With the deadline approaching, it remains unlikely the Treasury will soften its stance. Many recyclers have also already spent many thousands preparing fuel tanks for the change.
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