Assessing the impact of the Deposit Return Scheme on UK material recycling facilities

The Deposit Return Scheme (DRS) has long been discussed across the waste industry, and the policy is intended to provide an alternative recycling system for single-use beverage containers consumed both on the go and at home. The scheme operator, Exchange for Change, suggests this is expected to cut waste, boost recycling, and create a circular economy that works for everyone.

Key features of the proposed DRS include:

• In scope countries - England, Wales, Scotland, and Northern Ireland
• Deposit value - 20p per container
• Material scope - single-use PET bottles and steel or aluminium beverage containers between 150ml and 3 litres
• Glass - included only within the Welsh scheme

The current proposed implementation date for DRS is October 2027. Although the implementation date is not guaranteed, there has been recent progress towards the scheme's delivery. On 30th September 2026, Exchange for Change announced the appointment of five waste management contractors to provide the required logistics and infrastructure services, which are expected to be rolled out in a phased approach with initial infrastructure due in 2027 and a phased expansion by 2030.

Prior to this announcement, in September, several organisations including LARAC and an alliance of materials recovery facility (MRF) operators, called to Defra for a delay to the policy. This was due to the complexity of the scheme and the number of concurrent policy reforms affecting the waste sector. Market speculation also suggested there may be delays due to retailer’s concerns that the DRS could increase administrative and infrastructure costs, which may be reflected in higher grocery prices for consumers, adding pressure during the cost-of-living crisis. While the environmental objectives of DRS are widely supported, the diversion of valuable materials away from existing and well-established kerbside recycling systems is expected to have significant implications for local authorities, MRF operators, the wider waste management infrastructure, and the UK recyclate supply chain.

Implications of DRS on material recycling facilities

Currently, the UK predominantly operates a kerbside collection system for dry mixed recycling, and the majority of recyclable materials, once collected, pass through MRFs for sorting and onward reprocessing. The policy implementation will shift DRS-eligible materials away from traditional recycling collections and into dedicated DRS collection, counting, and sorting infrastructure, while existing facilities continue to process the remaining non drinks and non-scope recyclables. The introduction of DRS will have commercial, volumetric, technical, and strategic implications for UK MRFs, creating uncertainty around future material flows, asset utilisation, and investment decisions.

A significant proportion of MRF revenue is typically generated from a relatively small number of higher-value material streams, such as aluminium cans, PET plastic, and natural HDPE, subsidising the recovery of lesser valued materials.

SLR has assessed the potential impacts of DRS for several UK MRF operators. One of SLR’s recent detailed MRF impact assessment studies found that while DRS materials accounted for approximately 10% reduction in the facility's inbound tonnage, their removal from the material stream was estimated to reduce total MRF revenue by between 35% and 45% after five years of DRS scheme implementation. The assessment found that aluminium cans would account for the majority of these material losses (approximately 77%), reflecting their high value and contribution to MRF revenue. The study also identified the aluminium can and PET sorting lines as the areas most likely to experience significant impacts, whereas steel cans were found to be the least affected material stream. Further details of the assessment are provided in the ‘Responding to uncertainty’ section below.

It is important to note that the impacts of DRS will vary between facilities and these figures should not be considered representative of all MRFs across the UK. The scale of impact will depend on factors such as the composition of incoming waste streams, contractual arrangements, processing technology, and existing revenue structures.

In addition, there are limited comparable case studies available to assess the potential impacts of DRS on MRFs. While several Nordic countries have operated DRS systems for over 25 years, these schemes have evolved alongside their kerbside collection systems. More recently, many European countries have begun implementing DRS following the EU's mandate; however, these markets often have different waste collection arrangements and may not have well-established kerbside recycling systems comparable to those in the UK.

As a result, there is limited evidence from directly comparable examples, making it challenging to predict the long-term impacts of DRS on UK MRFs.

There are also concerns across the waste industry that differences in scheme scope between neighbouring countries may create opportunities for cross-border movement of materials if appropriate controls are not implemented. Within the UK, there are two notable examples. Wales shares a border with England and is proposing to include glass within its DRS, whereas England has excluded glass. A similar issue exists between Northern Ireland and the Republic of Ireland, where deposit values differ between jurisdictions. If these differences are not carefully managed, there is a risk of significant cross-border movement of containers as consumers seek to maximise the value of returned materials, potentially increasing opportunities for fraud.

Future-proofing MRFs

Recently commissioned, under-construction, and design-stage MRFs may face challenges where facilities have been configured around the current material composition. The removal of high-value DRS materials could affect anticipated returns on investment and may require further capital expenditure to optimise recovery and maximise value from the remaining material stream.

SLR is currently supporting a local authority in the design of a new MRF that is planned to become operational by 2030. Given the uncertainty surrounding the potential effects of DRS on material flows and facility performance, a number of design adaptations and future-proofing measures have been incorporated into the facility design to help mitigate potential risks and maintain operational flexibility. This will not be an isolated situation, and there will be numerous other local authorities and contractors considering ways to protect both existing and planned infrastructure from the anticipated significant impacts associated with the legislative changes.

Wider policy challenges facing MRFs

Alongside DRS, the industry is also preparing for the introduction of Simpler Recycling (ongoing), Emissions Trading Scheme (ETS) (which has now also been delayed), and the Packaging Extended Producer Responsibility (pEPR) policies. Collectively, these policies represent one of the most significant periods of change in the history of the UK waste and resources sector. While these reforms aim to improve environmental outcomes, the scale of change required across collection systems, treatment infrastructure, reporting processes, and contractual arrangements may create short-term challenges and uncertainty within the industry. This is further complicated by the fact that they are all intrinsically linked and the impacts cannot be considered in isolation, therefore a more holistic approach is required.

Sherbourne Recycling, one of the MRF operators consulted during the study, highlighted the need for a review of the Deposit Return Scheme (DRS):

“Our concern at Sherbourne, shared by our shareholders and customers, is that DRS is being progressed without the cumulative impact of pEPR, Simpler Recycling, TEEP assessments and changing collection systems being fully understood. While the scheme may remove a relatively small proportion of material from MRFs, it targets some of the highest-value PET and aluminium, leaving facilities to manage the remaining kerbside stream with lower material income and many of the same fixed operating costs. Exchange for Change needs to set out a practical mechanism for MRFs and local authorities to recover deposits on eligible containers that residents continue to place in kerbside recycling. We believe these interactions, and the important role MRFs continue to play in achieving high capture rates and maintaining viable recycling services, need to be properly evaluated before implementation.”

Timberpak Pearce, another MRF operator consulted during the study commented:

“We share Sherbourne’s concerns, which reinforce the issues we have consistently raised with policymakers and regulators throughout 2026. Without properly funded local authority kerbside collections and a commercially viable MRF sector, the collection and packaging reforms will fail. The UK’s 100+ MRFs are essential infrastructure, and their ability to operate, adapt and invest must be central to the government’s plans and not be undermined by them.

Yet operators are still waiting for answers to fundamental questions about what DRS leaves behind. Defra, the Environment Agency and Exchange for Change must now take ownership of their respective responsibilities and work directly with operators to resolve these questions. We need clear, published decisions and sufficient time to implement any necessary changes. The success of reform depends on protecting and supporting the collection and sorting infrastructure that households and local authorities rely on every day.”

One of the biggest challenges facing MRF operators is keeping pace with policy changes and adapting operations accordingly, while remaining consistently profitable. This is made more difficult by uncertainty around implementation timescales, as many policies have been subject to delays. There also appears to be a lack of clarity regarding how these changes will affect different stakeholders across the sector. For example, many MRF operators remain uncertain about how DRS materials that continue to enter kerbside collections will be managed, and whether they will have obligations to identify, segregate, or account for these materials within DRS arrangements.

It is also unclear how recent policy changes will affect the composition of kerbside collections in the future. Under Simpler Recycling, local authorities will be required to collect additional material streams, including plastic film and aluminium foil, which could partially offset some of the material losses associated with DRS. However, while these materials are broadly comparable to PET bottles and aluminium cans, they typically have lower market values and less developed end markets, which may increase collection and processing costs. Furthermore, significant quantities of plastic film can create operational challenges for MRFs by becoming entangled in processing equipment and contaminating other recyclate streams, reducing operational efficiency and potentially impacting overall revenue generation.

The impacts of the ETS and pEPR are more nuanced, as outcomes will depend largely on how operators and organisations respond to policy, and the resultant impacts that local authorities will face.

Responding to uncertainty

During periods of uncertainty, it is important for organisations to understand and quantify potential impacts to support effective planning and decision-making.

A recent joint assessment conducted by SLR’s Sustainable Waste Management and Process Engineering experts undertook waste flow modelling and assessed process flows, equipment utilisation, and forecasted performance from a MRF operator.

The waste flow modelling considered several scenarios; government aligned, real world aligned (an average of European DRS performance), and a Low DRS scenario (government aligned with reduction factor of 25%) compared against a baseline scenario to quantify the throughput of materials targeted by the DRS. These forecasts were then used to estimate the financial impacts using annual MRF revenue data. The results indicated that throughput and associated revenues were expected to decrease under all scenarios assessed.

The process flow and equipment assessment examined the impacts of DRS through six key technical considerations: current material capture methods, headline DRS impacts, process equipment utilisation, material flow changes, separation performance, and potential operational alterations. The assessment identified which sorting equipment would be most affected and recommended potential mitigation measures to address the impacts identified.

Without comprehensive intervention, reductions in tonnage across more desirable material streams could lead to disproportionate increases in other less desirable material streams and have the potential to increase contamination and lower recyclate quality.

The scope of our initial study focused on the impacts of DRS, however, there would be value in expanding this to also consider anticipated composition and tonnage changes arising from all forthcoming policy reforms, to gain a clearer overall picture. The current level of uncertainty surrounding policy implementation means that any estimates would necessarily be high level and include a number of assumptions. More accurate modelling could be undertaken at a local level where forecasts are available from multiple stakeholders, such as local authority collection projections and MRF end market or treatment strategy assumptions.

Conclusion

While the environmental benefits of DRS are broadly recognised, significant uncertainty remains regarding how the policy will interact with other reforms and influence MRF operations, which will ultimately have a significant influence on the overall recycling performance of the sector. The impacts are likely to vary considerably between facilities depending on throughput, material composition, technology and contractual arrangements. As policy implementation approaches, organisations that proactively assess operational and financial risks will be better positioned to adapt to future changes and identify opportunities within a rapidly evolving waste sector.

Continue the conversation at the upcoming MRF & Markets Conference 2026

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SLR will be expanding on the findings from our recent studies, sharing our wider thoughts, and encouraging further discussion across the industry when we present at the MRF and Markets Conference on 5th November.

The conference is designed for a wide range of stakeholders within the waste management sector, including policymakers, local authority officers, waste management operators, investors, and other industry professionals. The programme will feature speakers from across the sector, discussing policy developments, emerging challenges, technological innovations, and practical approaches to addressing them.

SLR at MRF & Markets Conference 2026