Next time you (hopefully) recycle your cereal box or plastic drinks bottle, spare a thought for the packaging industry. These quiet and relatively unseen heroes promote, store, transport and protect the things that you love inside. From in-store packaging with promotional designs to online shopping cartons and bags, they serve multiple purposes. However, they are also under siege from a raft of environmental initiatives and tax increases. This is aside from the current destabilising geopolitical and macroeconomic conditions having an increasingly deleterious effect on living standards and business confidence. So, please read our thought piece on packaging industry challenges adding to UK inflation.
Packaging industry
The global packaging market is estimated at between £800bn to £900bn as of 2025, depending on the source. The general consensus is of a 3% to 5% CAGR between now and 2035. Of this value, around 74% relates to the Fast-Moving Consumer Goods (FMCG) market, around 15% is pharmaceutical, 5% eCommerce and retail and 6% industrial packaging. According to Statista, the split of materials is approximately 44% plastics, 33% paper/board, 12% metal and 11% glass and other materials. From a UK perspective, the range of estimates vary but the general consensus is £40-45bn or around 5% of the global market.
However, not all types of packaging are growing at the same speed. Flexible packaging, such as pouches and food wrappers are growing faster than the average at a CAGR in the range of 8% to 9%. Similarly, polystyrene and expanded polystyrene (EPS) is seeing decline due to recyclability. Although plastics still dominate, they are increasingly getting replaced by paper/board or other biodegradable materials. Furthermore, mixed material packaging, such as laminates, are requiring a transformation because they are difficult to recycle. Finally, the general consensus on UK growth is a 2% to 3.5% CAGR by 2035.
Packaging industry challenges
Here are 3 of the major challenges that we see in the packaging industry as of 2026. For this section, we will mainly focus on the UK landscape.
Plastic Packaging Tax
The UK introduced a Plastic Packaging Tax (PPT) in April 2022 – now a £228.82/tonne levy since 1st April 2026 on plastic packaging either manufactured in, or imported into, the UK with less than 30% recycled content. Any plastic liable to the PPT are polymer-based materials to which additives or substances may have been added. Chemically modified cellulose-based polymers, such as cellulose acetate, are treated as plastic. If the packaging is mixed material but has a higher proportion of plastic than any other component, it is also treated as plastic. This tax applies to anyone who has manufactured or imported more than 10 tonnes of plastic packaging in the previous year.
Extended Producer Responsibility
Next, we have the Extended Producer Responsibility (EPR) rules covering the supply or import of packaging. Companies with greater than £1m annual revenue who supplied or imported more than 25 tonnes of packaging are included. It mostly covers the supply of packaged goods, filling of packaging and supply of empty packaging. Larger businesses may need to collect data on units and weights of packaging, get waste recycling notes, pay waste disposal fees, scheme administrator costs and the environmental regulator. The waste disposal fee is calculated based on ‘household packaging’ that may end up in public waste bins. They may also need to collect data on which nation in the UK the packaging is both supplied and discarded in. Finally, reporting should include lids/labels/wrappers etc separately, reusable packaging separately and ‘self-managed’ waste, such as a recycling schemes (for offset), and internal waste. This data must be submitted every 6 months.
Supply chains, investment and skills
On top of the additional administrative burden of Brexit, supply chains are experiencing choppy waters. Raw material input prices are volatile, freight costs are volatile, timescales can vary (particularly via the Strait of Hormuz) and there are some shortages, notably where oil is involved or certain chemical additives. There is a great need to innovate and advance packaging design and materials. Machinery is a substantial investment and the current regulatory regime has already added cost pressure. The industry also needs expertise in design, technology, materials, additives, coatings, regulatory standards and product testing. There is a generally an acknowledged shortage of such skills to boost sustainability and move away from petrochemical-based materials.
Packaging material challenges
The next layer of the cake is to consider the materials used, recyclability and compostability.
Raw materials
Most plastic packaging is made from Polyethylene Terephthalate (PET) and it is primarily composed of oil – a fossil fuel. According to the British Plastics Federation (BPF), around 6% of global oil production is used to make plastics. To put this in perspective, if around 44% of packaging materials are plastics (perhaps closer to 48% in the UK), it has seen a price spike. Brent crude oil has increased from around $60 per barrel at the start of the year to $115 at the time of writing, which is almost double. It takes around ¼ of a litre of oil to make a 1-litre plastic bottle. A barrel of Brent crude oil is 159 litres or 42 US gallons. That means that a single barrel can make 636 of those 1-litre plastic bottles. Ultimately, this means a price increase from just over 9 cents to nearly 18 cents per bottle.
Additionally, we would be remiss not to mention that much cardboard packaging uses oils, plastics and other chemicals for coatings and linings. The likelihood increases when the packaging is used for the storage of food, waterproofing and heat resistance. The inks used in packaging may also be derived from oil-based products. For those who signed large, long-term contracts with FMCG giants, this represents a significant cost pressure.
Recyclability
The UK Government has an ambitious target to recycle nearly 2/3 of UK household waste by 2035. This comes despite missing the previous target of 50% by 2020. The latest Parliamentary briefing on plastic waste showed a 10% reduction in plastic packaging produced from 2012 to 2024 with a recycling rate of 51%. It is estimated that around 47% is exported. Paper or cardboard, when lined with polyethylene or per- and polyfluoroalkyl (PFAs) substances for protection, or when coated with polyethylene for aesthetics, are harder to recycle. Similarly, mixed materials combining glass and metal, plastic and silicone or cardboard and adhesives have low recyclability. Achieving the targets set by Government will be challenging without support from the packaging industry.
Compostability
If you don’t want the cost of processing waste or recycling it, the next best thing is to compost it. EN 13432 is the European packaging and materials standard covering disintegration and biodegradability. Under these rules, should your business be certified, 90% of the materials must degrade into CO2, water and/or biomass within 26 weeks. Alternatively, 90% of the material must decompose into micro-particles less than 2mm x 2mm within 12 weeks. The resulting residue must not be ecologically toxic to be compostable. The British Standard equivalent is BS EN 13432. Packaging certified to this standard can feed into commercial composting. As before, this requires investment and skills to realise new packaging designs with alternative materials, techniques and advanced technologies and machinery.
Working with the packaging industry to solve challenges
In conclusion, there is substantial cost pressure, uncertainty and regulation surrounding the sector. This will further squeeze margins, increase the bureaucratic burden and push supply chain resilience high up the agenda. There is also a looming investment, labour and skills shortage to transition towards more sustainable, recyclable and compostable packaging. Cost efficiency and transformation may be high on the agenda with limited investment headroom and tightening labour and expertise availability.
If you would like to speak to our team, simply drop us a quick note via our website. Alternatively, you can send an email directly to sales@think-beyond.co.uk.
Finally, check out an article on supply chain confidence and two types of transformation.