New research from BB-REG-NET has found that the UK government’s existing tax regime is working against its stated ambitions for a circular economy. The study points out that while official strategies call for more reuse, repair, and recycling, fiscal policies continue to favor linear consumption and disposal.
According to the findings, inconsistencies in tax structures mean that products made from virgin materials are often taxed less heavily than those incorporating recycled content. Similarly, repair services are subject to the full rate of VAT, while new products can benefit from lower or zero rates.
Researchers warn that this creates a paradox: businesses and consumers face higher costs when choosing sustainable options, while environmentally harmful practices remain cheaper. This situation, they argue, is directly undermining the UK’s ability to meet its circular economy and climate targets.
The report calls for a thorough review of the tax system to align it with sustainability goals. Suggested measures include reducing VAT on repair and reuse services, applying higher taxes on virgin materials, and providing stronger fiscal incentives for recycling industries.
Industry representatives have welcomed the study, noting that predictable and supportive tax policies would encourage investment in circular solutions and create green jobs. They stressed that without reform, the UK risks missing both its economic and environmental targets for resource efficiency.
