Waste and resources sector brings £41 billion to UK economy

The waste and resources sector, including repair, reuse and leasing activities, contributes £41 billion to the UK economy, the Department for Environment, Food & Rural Affairs (Defra) has found.

Its ‘Resource management: a catalyst for growth and productivity’ report, released today (5 February), considers the recent and potential future contribution of the sector to wider economic growth across three broad themes: extracting greater value from waste; increasing resource efficiency; and increasing the export of goods and services.

Waste sector may provide up to £41 billion of GVA

The report reveals that the core waste sector generated £6.8 billion in gross value added (GVA) and supported 103,000 jobs in 2013, but that if repair, reuse and leasing activities are added to this, the contribution could be ‘£41 billion to approximate GVA’, supporting 672,000 jobs.

However, the report notes that although the GVA of the waste and resource management sector has grown at a faster rate than the wider economy (and adds almost £41 of GVA for each tonne of waste treated compared to the mining and quarrying sector, which adds £15 per tonne for each tonne of material produced), the value of the waste sector fell ‘considerably’ at the beginning of the recession (2008/9) – much more than the rest of the economy – and ‘while now improving has not yet recovered to its pre-recession level’.

Despite this, the value extracted from waste has increased over the past eight years, rising from £32 of GVA per tonne of waste in 2004 to £43 in 2012 (adjusted for inflation).

Recycling was also found to be a lucrative process for the economy, with Defra finding the UK may recover ‘several billions of pounds’ of value from recovered materials every year, seeing that dry recyclables collected from households in 2012 alone were worth between £0.3 billon and £0.5 billion.

Energy-from-waste expected to increase

The rise in the use of energy-from-waste was also noted in the report, with Defra estimating that £447.4 million of electricity (9,005 gigawatt hours (GWh)) was generated from waste in 2013, with £155.5 million (3,130 GWh) generated through residual waste treatment, £35.1 million (707 GWh) from anaerobic digestion (AD), and £256.8 million (5,169 GWh) through the capture of landfill gas.

Indeed, Defra states that by 2020, electricity generation from residual waste treatment such as incineration will increase to approximately 893 megawatts (MW) (worth £330.4 million) as emissions from closed landfill sites ‘tail off’.

It added that the waste sector could produce more value from the AD process if all the AD plants with planning consent (capable of generating 272 MW of electricity) are built.

Export vs domestic recovery

According to Defra, the UK exported £5 billion of recovered materials in 2012 (as the domestic reprocessing sector is ‘not large enough to use up all of the materials recovered in the UK’). However, the tonnages of materials currently recovered domestically are not yet know. As such, Defra statisticians are now compiling a dataset for the tonnages of materials recovered in the UK, which is expected to be completed in ‘spring 2015’.

Defra does note that the waste and resource industry employs a large number of people across the UK. Indeed, it found that in 2012, the average GVA per hour worked was approximately £31 per hour, above the UK whole economy average of £27.8 per hour. The labour productivity of the waste sector was also above the national average for each of the four years preceding 2012, with material recovery jobs being the most productive. This area saw an average GVA of £39 per hour in 2012, followed by collection (£28) and waste treatment and disposal (£27.30).

Future vision

The report reads: ‘Moving towards a more circular economy… is essential for our future growth, increased resilience and environmental and human health. Resource and waste management activity already makes a significant contribution to the economy. It does so directly by capturing value from waste, and indirectly by generating sales for companies that supply goods and services that support resource management, reducing costs for households and business that rely on it, and contributing to wider resource security….

‘Significant opportunities remain for businesses and the wider economy as we transition to a more circular economy.’

Looking to the future of the sector, Defra states that it will be:

• developing a bioeconomy roadmap in conjunction with the Department for Business, Innovation & Skills (BIS) to explore how biotechnologies can ‘extract new, high-value petrochemical, pharmaceutical and agricultural inputs from residual waste’, and how it compares to established technology and approaches;
• helping business make further progress on waste prevention through ‘better regulation’ that allows businesses to reduce costs and generate revenue from their waste where it can be used to create ‘quality new products’;
• raising awareness of global export opportunities to better understand the extent to which UK companies with waste and resource management solutions are looking to act upon them, and discuss the respective roles of sector bodies, UK Trade and Investment (UKTI), BIS and Defra in helping them do so; and
• exploring the drivers of value creation at each rung of the waste hierarchy and how these are likely to change over time to ‘help strengthen our understanding of the extent to which the market is likely to continue to deliver increases in productivity’.

It concluded that it will be discussing this analysis with ‘key sector bodies’ to hear their views on: whether it ‘captures the breadth of the [sector’s] current contribution and the opportunities moving forward’; whether other evidence exists that strengthens the case for further action; and what actions, if any, sector bodies and their members are planning to take to capitalise on the circular economy.

‘Hard times for the recycling industry’

The report has been welcomed by the Environmental Services Association (ESA), but the trade association warned that there are still challenges facing the industry.

ESA’s Executive Director Jacob Hayler said: “The industry has gone through a period of radical change during the last 10 years and is now extracting more value from waste than ever before. This is helping to create thousands of productive and skilled jobs all around the country.

“But at the same time, we mustn't shy away from the fact that these are currently hard times for the recycling industry. Recyclers are struggling as local authority cost pressures are leading to more contaminated material being pushed on to the market which has little, if any, value.

“The resource sector's true potential – as recognised in Defra's report – will not be realised unless we can fix a broken supply chain which, at the moment, is not producing the valuable outputs the market demands.”

The Resource Association's Chief Executive Ray Georgeson also commented, saying: “We warmly welcome this analysis from Defra, it is a useful re-assertion of the value of the resource management industry to the UK economy and we hope it will act as a reminder across government of both our industry’s value and future potential. Acknowledging that we presently face a period of turbulence and uncertainty, whether that is due to the resources policy hiatus in Europe and at home, or to commodity prices, or to Eurozone uncertainty, or indeed all three and more, we must use the period of uncertainty to look ahead and refresh our long-term ambition.”

He added that henceforth the UK Government should: "actively engage" with the European Commission's circular economy package revisions; consider undertaking further research in the value of domestic reprocessing vs exporting of materials; and "refocus the resource it makes available to WRAP back onto the unfinished task of recycling market development that WRAP was originally founded to facilitate" (including establishing a "new baseline for where the potential for manufacturing growth may lie, the barriers to success, and a new route map for the R&D, standards work, product testing, feedstock quality sourcing and other work that will be needed to deliver more manufacturing capacity".

The newly-appointed Chairman of the Resource Association, Peter Clayson, concluded: “In all these areas, the Resource Association and its members stand ready to work with Defra to support their ambition for resource management.  All three actions highlighted require leadership from Government but also require the industry to respond and engage, which we are keen to do.  The report is a great foundation for action, and we hope that it may become an annual feature of the Defra programme and turn into a ‘state of the industry’ exercise that continues to catalyse and move us towards a more circular economy.”

Read the ‘Resource management: a catalyst for growth and productivity’ report.