2022 PRN Revenue Expenditure
Alongside the recent release of the final packaging recycling figures for 2022 (Q4 verified), the Environment Agency (EA) have also once again released data outlining the expenditure of revenue generated through PRN sales throughout 2022, by accredited reprocessors and exporters. 2022 saw the UK’s total PRN revenue reach its highest point since the PRN system’s inception.
As a reminder, the PRN system is designed to operate in a way that encourages accredited reprocessors and exporters in the UK to recycle more packaging waste during periods of market pressure and high prices. This is incentivised by the potential for additional financial gain. The higher prices can also attract new reprocessors and exporters into the market. The aim of this approach is to increase the supply of PRNs and balance it with the demand, which in turn should ease the original price pressure on the market. The theory behind this is that increased recycling activity will lead to a more balanced PRN supply, which will help to ensure sustainable and effective management of packaging waste in the UK.
Trends and Totals
Even with the ongoing impact of the COVID-19 pandemic during large parts of 2021, the UK’s packaging industry achieved impressive recycling rates in terms of reprocessing and exporting. The Environment Agency's data releases indicated that a substantial volume of packaging waste was recycled throughout the year, even during periods where other sectors within the UK were facing difficulty. This strong performance contributed to more stable PRN markets, with less pronounced fluctuations in prices and lower overall volatility for all materials.
However, the market dynamics of 2022 showed the major challenges faced by all materials in the UK, particularly plastic, glass, and aluminium. Although historically it is not uncommon for one or two individual materials to experience adversity and recycling levels to be concerning, the periodic releases of recycling data in 2022 showed that the overall tonnage of all materials being recycled was falling short of their inflated annual targets. The large obligation, and therefore PRNs required in 2022, were driven by an uptake in packaging use and changing behaviours during the lockdown periods of the 2021 calendar year. This increased demand resulted in a sharp and sustained increase in PRN prices across almost every material, with some peaking at over £500 per tonne.
Nevertheless, the PRN system proved its effectiveness by incentivising greater recycling activity, which helped to achieve compliance by the end of the year, albeit with the use of some available carry in of PRNs generated in December 2021. Despite the prolonged uncertainty and high prices of 2022, the PRN system successfully maintained compliance, despite these efforts leading to a tough beginning to the 2023 compliance year.
The prolonged uncertainty and high prices of 2022 resulted in a total PRN revenue amount approaching £489 million. These levels were record highs and made it an 'extreme' year for the PRN system, and all stakeholders operating within it.
Figure 1: Total PRN revenue 2015 – 2022
Figure 1 depicts how the more stable PRN market of 2021, compared to the more turbulent market of 2022, has resulted in an increase of around £350 million in total PRN revenue, bringing the final total to approximately £489 million. This is a significant increase from the final total of £139 million in 2021, and when viewed in the context of the last seven years, it further emphasises the extreme nature of the year driven by prolonged periods of peak prices, across multiple materials.
Despite price increases in all materials, plastic, glass and aluminium PRNs remained the most valuable among all materials and contributed the most to the overall PRN revenue generated.
Recycling targets have increased in recent years, leading to a higher demand for PRNs, which has once again been the case for 2021 into 2022. This, in turn, meant that more PRNs were required to meet the annual targets, which will have therefore also contributed to higher revenue.
Table1: PRN revenue contribution by material 2022
Table 1 presents an overview of the total revenue generated, highlighting plastic as the primary contributor (47% of total), owing to its relatively higher price point in comparison to other materials, even during periods of perceived lower demand. Paper and glass are the next two highest contributors.
The relatively high recycling targets for paper and glass (83% and 82% respectively) imply that a significant number of PRNs need to be purchased for these materials to meet the UK obligation. For paper, in 2022 over 3.5 million PRNs were required to meet the specific recycling target, resulting in a substantial contribution to overall revenue despite a lower average PRN price compared to most other materials. Similarly, glass has a high obligation and typically commands a higher average PRN price than paper, leading to a significant contribution to total revenue.
Investment into the UK recycling ‘system’
In addition to providing data on total revenue and by material, information on the category of re-investment is also disclosed. This is mandated by the Environment Agency, which requires all accredited UK reprocessors and exporters to report on how the money generated from PRN sales is being re-invested back into the UK recycling system. It is crucial for all revenue to be re-invested to maintain compliance with regulations. Therefore, any reprocessors or exporters who fail to report or are found to be fraudulent in their generation of PRNs or reporting on investment, would face strict penalties.
Figure 2.1: Total 2022 PRN revenue investment channels for UK Reprocessors and UK Exporters
Figure 2.2- Total PRN revenue investments by activity 2022
Like previous years, reprocessors and exporters are required to categorise their investments from the revenue gained through the sale of PRNs. This information is presented in figures 2.1 and 2.2, with the categories remaining classified as:
• Infrastructure and capacity
• Funding collection
• Reduction in price and developing new markets
• Cost of complying with the regulations
• Retained for future investments
• Developing communication strategies
The latest reporting on PRN revenue investment shows that, like in the previous years, the three most significant categories for reinvestment are still ‘infrastructure and capacity’, ‘funding collection’ and ‘reduction in price and developing new markets’, as illustrated in figure 2.2. Despite the difficulties encountered in 2022 it seems that, as the recycling levels and expenditure increased, the investment channels and areas of focus for the generated revenue remained similar.
There are differences between the investment strategies of approved UK reprocessors and approved exporters, as they operate with different business models and often require varying degrees of input and cost.
Figure 3.1 - Exporters PRN revenue investments by activity in 2022
Figure 3.2 - UK Reprocessors PRN revenue investments by activity in 2022
Despite the large difference in PRN revenue between 2021 and 2022, it is notable that the investment behaviours of both reprocessors and exporters have remained largely unchanged. As shown in figures 3.1 and 3.2, both types of PRN sellers continue to prioritise their investment in the same top three channels as in 2021, with exporters focusing more on 'funding collection' and UK reprocessors directing most of their investment into 'infrastructure and capacity'. These investment channels are crucial for the success of the current PRN system, which is in use in its current form until 2023.
In 2022, there was a significantly higher amount of PRN revenue generated to invest in the UK recycling system, compared to 2021. This increase can be attributed to several factors, including the cost-of-living crisis and a sharp rise in energy prices, which drove uncertainty, volatility and sustained high PRN prices throughout the year.
If the PRN system is to remain effective and work as intended, the additional PRN revenue generated, and its subsequent re-investment, should now contribute to improving packaging recycling efficiency and volume in 2023. If this is realised then it is likely that markets would become more stable with potentially, comparably lower price levels than last year, but this remains to be seen as of yet.
Our packaging and procurement teams will continue to capitalise on opportunities within the current PRN market to minimise your compliance costs. We will also keep you fully informed on market trends and pricing through our monthly PRN communication which can be viewed on the ‘PRN Centre’ section of the member log in area on our website, and also through our regular PRN update webinars. If you have any further questions regarding 2022 PRN revenue expenditure, please contact our procurement team at email@example.com / 01756 702556 or firstname.lastname@example.org / 01756 706578.
We hope that this overview has been helpful and informative, providing greater transparency for producers regarding their PRN spend.