Waste sector not out of woods as recession ends

The waste management sector is not out of the woods yet despite the UK bouncing back from a double-dip recession, experts have warned.

Better-than-expected estimates published by the Office for National Statistics today (October 25) showed that Gross Domestic Profit (GDP) increased in the third quarter of 2012 by 1% compared to Q2.

Output from the production and service industries was estimated to have increased by 1.1% and 1.3% respectively during the period. However, output from the construction sector decreased by 2.5%, compared with a decrease of 3% between the first two quarters of 2012.

Prime Minister David Cameronwelcomed the figures and said they showedthat the UK was on the right track.

However, the figures are thought to have been buoyed by one-off events like the London 2012 Olympics and the fact that there was an extra bank holiday in the second quarter of the year for the Queens Golden Jubilee, meaning that performance in that quarter was reduced in comparison.

Waste

And, experts have cautioned that thecontinued decline in theconstruction sector, volatile overseas markets and nervousness among the bankswill continue to impact upon the waste management industry.

Jacob Hayler, economist at the ESA, the trade association for the waste management sector, said: I certainly dont think we are out of the wood yet. 1% is a good quarter three performance but it only gets us back to where we were a year ago. And outputs in the high waste intensive sectors such as construction continue to fall.

Mr Hayler said the UK had seen a massive decline in waste volumes over the last four years and that recyclate prices have been falling, making it very difficult for those managing commercial and industrial waste or landfill sites. He added that the performance of municipal waste contracts had helped to offset some of this, but there continued to be difficulties.

He said: I believe things will continue to be difficult in terms of commercial and industrial waste and recyclables prices for a while. Data from China continues to be on the weak side and it is the Asian economy which will have the largest impact on commodity prices and prices of secondary raw materials.

‘Cautious’

Caution over the economic situation also came from Paul Briggs, director of recovered paper firm Mark Lyndon, a major exporter to China. Mr Briggs said hewas pleased to hear that the UK was out of recession but also noted that there were still financial difficulties in various parts of the world. I think we should very cautiously celebrate that we have been in recession and come out of it. This has been a major recession and we only just slipped back but whether we are above or below the line, much of the world is bankrupt.

Lets be thankful and continue what we are doing. From a personal view, I think the government has to continue with the spending cuts as well as boosting industry. They have promised this but there is always a gap from what the government says it is intending to do and actually getting the practice through.

However, MrBriggs stressed that the Chinese economy was still reasonably strong. Yes, Chinas growth is slowing but lets not get too depressed. A slowing to 7.2% isnt too bad so dont knock it.

Infrastructure

The Foresight Group, which manages a 50 million government fund to invest in small-scale waste infrastructure (soon-to-be the Green Investment Bank) (see letsrecycle.com story) also said it was too early for any celebrations. In particular, the Group said that the UKs emergence from recession was unlikely to make it easier for waste management companies to gain funding for waste infrastructure from the banks.

“We dont expect to see any dramatic change in the lack of lending from the banks”

Andrew Page, Foresight Group

Andrew Page, environmental partner at Foresight Group, said: Often the biggest issue confronted by many of these projects is the continued dearth of debt funding coming out of the Banks.

We are currently targeting green infrastructure in Greater London and across the UK as a whole investing funds sponsored by UK Government and the European Investment Bank besides others, and although the figures published today by the ONS reveals a welcome emergence from the double dip which will invariably have a generally positive impact across all industries, we dont expect to see any dramatic change in the lack of lending from the banks and until that happens many managers in the sector will continue to find the climate challenging.

Plastics

A slightly moreoptimistic interpretation of the figures came from Stuart Foster, chief executive of plastics recycling organisation Recoup.

Mr Foster said that while it was too early to tell what the effect of the figures would be, coming out of recession could only be a good thing given the investment required to meet the higher targets for plastic packaging recycling from 2013-17. He said: Hopefully we will start to see more investment opportunities available.

Mr Foster said this would come at a good time as recent talk of trade restrictions in China meant that the UK may need to reduce its reliance on export markets.

He added that a number of UK plastics sector firms have grown within a recession, so we hope they will only get stronger out of the recession.

Investment

Peter Calliafas , who is currently involved with a range of organisations in the waste and recycling, agreed that he expected investment to pick up as the economy grew.

He said: “The sector is underpinned by regulatory demand drivers and this gives rise to investment opportunities over the medium term. Clearly, the merits of any business case are linked to UK economic activity and to this extent, the latest figures are welcome.”