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03 Jun 2019

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LKM Recycling in Sittingbourne, Kent is a medium-sized waste and recycling company. In terms of Brexit, like most of the UK, we are unsure of the outcome, but have looked at scenario planning to attempt to mitigate the potential negative effects.

The ferrous metal (steel / iron) market is crucial to LKM’s business with over 100,000 tonnes of metal exported to Europe each year, to be recycled and turned into new products such as cars and steel girders.

Brexit could affect profitability in several ways depending on what form it finally takes. The EU currently offers easy access to European markets and has enabled us to grow over recent years, as the decline in steel production in the UK means less opportunity to sell in volume to those companies. In addition, with the US imposing tariffs on iron and aluminium imports the opportunities are larger but fewer.

So, in terms of recycling, how has Brexit affected the company already, and what scenarios do we see in future?

In the short term nothing really changes until we are clear on the government’s strategy. The pound is currently weak against the euro, so our metals are competitively priced in Europe for the quality.

One area of concern is plastic waste, though, which is suffering from a lack of processing capacity in the UK. When China shut its doors to plastics from outside the country last year, it meant that a lot of surplus plastic was then sent from the UK to mainland Europe for clean burn energy in places like Poland and Germany. If the cost of doing this increases due to a further sliding pound, this may put pressure back onto landfill in the short term – something we would like to avoid at all costs.

In the medium term it, all depends on the type of Brexit and its impact on the country. If we do have a hard economic jolt, people will probably have less cash to spend, so it maybe that more companies and individuals seek out cheap solutions rather than the more expensive (and more responsible) fully licenced carriers and processors of plastics. Hopefully this means not more fly tipping – but it is a probability.

There is a concern that if Brexit means trade with Europe switches to WTO terms, plus the WTO terms are imposed on UK goods for countries like Turkey, USA and India, then LKM could have a challenge in competing on price despite the efficiency advantages that we have.

Another area to consider is the machinery investments that LKM are planning to make over the next few years. If it becomes clear that purchasing a piece of machinery from mainland Europe becomes expensive and harder to service due to parts being unavailable or expensive then LKM would look at UK manufacturers to fill the gap. Our ability to process the raw material efficiently is our key to being competitive and ensuring we can recycle most materials.

Truthfully, we can predict some issues but not others. Our key focus is ensuring that we still recycle as close to 100% of all the materials that come in responsibly, and that we to continue to avoid landfill.

This means ensuring that our customers on the manufacturing side are long term partners, and stick with us based on the quality and competitiveness of our output rather than just a straight transaction. It also means ensuring that our material sources are as good as possible in terms of quality, volume available and price to enable us to keep our own prices competitive.

By Simon Baxter, Marketing Manager at LKM.

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