The impact of Covid-19 on the UK recycling supply chain

Peter Sainsbury, Lead Economist at WRAP

The global economy normally works like a massive flywheel. Finely tuned, it is optimised for ‘just in time’ delivery. Of course, it goes through cycles in which activity runs too hot, followed by periods where things take a turn for the worse.


As coronavirus spread across the globe since the start of 2020, so have a wave of lockdowns. Measures to restrict the spread of the covid-19 have created massive friction for many businesses and brought an outright halt to many others. The flywheel came to a screeching stop.


According to the Office of Budget Responsibility (OBR) the UK economy could shrink by 35% in Q2 2020 and unemployment may hit 10%. In these unique times, forecasts naturally come with a high degree of uncertainty. Nevertheless, the size of the potential hit to the economy does highlight how momentous and widespread the impact is likely to be.


The UK recycling supply chain has not gone unscathed.


Social distancing measures haven’t put a stop to kerbside recycling collections, but household waste and recycling centres (HWRCs) are typically closed to avoid non-essential journeys by the public. These measures have allowed vital collections of many recovered materials to continue, although the supply of some materials have inevitably suffered. With many parts of the commercial and industrial sector closed due to the lockdowns, collections from households have become increasingly important.


Many of the materials collected from households must be sorted before they can go onto be recycled. Some of the Material Recovery Facilities (MRFs) that carry out this activity have also had to reduce the speed at which they can operate. This may start to reduce the availability of materials to be recycled.


Recycling is a vital part of the UK economy in ‘normal’ times. At this time of crisis, it is providing essential materials to support the NHS in saving lives (plastics for example), and packaging to ensure that essential goods can be safely transported across the country (often cardboard to protect items). The collection and recycling of many other materials are vital to help keep the lights on, to provide the raw materials for heavy industry, and to keep materials out of landfill (wood, metal, and textiles).


The UK recycling sector is diverse. Every recycling business faces challenges during this time, but while many businesses are thriving (for example, suppliers of plastic wrapping film to supermarkets), others are struggling and have had to put their businesses on ice and furlough their staff. Recyclers exposed to the construction, non-food retail and manufacturing, and clothing sectors have been particularly badly hit.


The recycling sector is not alone in having to rely on government support during these unprecedented times. A recent survey carried out by the British Chamber of Commerce (BCC) found that 71% of small & medium-sized UK companies have furloughed staff, with 30% saying they had furloughed more than three-quarters of their workforce.


Remember also that the UK recycling supply-chain supplies materials to a global marketplace. Other countries around the globe are facing very similar problems to our own, closing markets for some of our recovered materials. The textiles recycling sector has seen a sharp drop in feedstock as consumers decide not to renew their summer wardrobes, while at the same time finding that many of the markets for recovered textiles are closed or difficult to access due to covid-19 restrictions. Recycling operators unable to find an end market may now have to compete for warehouse space with other sectors of the economy, many of whom are non-food manufacturers and retailers unable to sell their products.


The broader macroeconomic slowdown may have longer term adverse impacts on recycling. Lockdown in the UK and across the globe has led to a sharp decline in travel, whether by road or by plane. The unprecedented decline in demand for oil has resulted in a 70% decline in the price of oil. The price of virgin plastics typically tracks changes in oil prices, at least over several months. In the face of a very challenging economic environment, there is a risk that low virgin plastic prices could reduce demand for recycled plastics.


The fallout from the virus may also serve to accelerate longer-term structural trends. One such sector that is particularly vulnerable is the newsprint recycling sector, which recycles newspapers into new newsprint. Newspaper circulation is understood to have declined due to lockdown, with some media outlets bolstering their digital offering as an alternative source of news. It remains to be seen whether newspaper readers revert to their old habits once the lockdown period comes to an end.


The recycling industry will have a vital role to play in rebuilding the UK economy. It will take time, and the costs should not be underestimated. But as the UK transitions to a post-covid-19 world, the recycling sector can also contribute to ensuring the UK becomes a more resilient economy. One where we move from ‘just-in-time’ to ‘just-in-case’ and one where we are better prepared for the inevitable shocks that the future will bring.