12 March 2020

Budget 2020: a greener future for innovation?

Chancellor Rishi Sunak delivered his first Budget in the House of Commons yesterday (11 March). One of the key focus areas for the 2020 Budget, in line with consumer concerns relating to sustainability in recent years, is on helping to steer the UK towards a greener future. The Chancellor announced a range of policies put in place to reduce emissions; protect the environment; build a resilience to climate change; and generate green economic opportunities across the UK.

One of such clean energy measures proposed by the Chancellor is ‘to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable’.

The Budget states that ‘[i]ncreasing the UK’s use of clean energy is a vital part of reducing carbon emissions and putting the nation at the forefront of new innovative industries’ – something that is fundamental to all of Mathys & Squire’s clean-tech sector clients when developing innovative technologies to solve environmentally challenging issues.

Green Lizard Technologies Ltd (GLT), a longstanding client of Mathys & Squire, has been developing commercially effective and environmentally friendly methods of recycling plastics. In November 2019, Poseidon Plastics Ltd (a joint venture between GLT, Panima Capital & Abundia Industries) partnered with the world’s leading differentiated producer of PET and PEN polyester films, DuPoint Teijin Films, in order to develop this unique polyester recycling technology. The process is unique in that it produces recycled material which is essentially free from contaminants, and therefore can be reused to produce food and drink packaging, such as PET recycled water bottles.

The new tax announced by the Chancellor – which kicks in from April 2022 – of £200 per tonne for manufacturers producing plastic items containing less than 30% recycled plastic, comes as welcome news to innovative companies such as Poseidon Plastics, and will create a huge incentive for manufacturers to explore and invest in PET recycling technologies.

Martin Atkins, CEO of GLT and Poseidon Plastics, comments: “The changes announced in the Budget today by the Chancellor mark an important milestone for plastics recyclers everywhere, and for pioneering companies like ours, a welcome boost to the importance of plastics recycling in the grand scheme of reducing environmental issues. This marks a major step forward in recognising the importance of plastics in our daily lives, e.g. increasing the shelf life of foods and minimising the impact of packaging costs in the value chain.”

Commenting on the announcement, Mathys & Squire partner Chris Hamer, who acts for GLT, said: “This could be a real turning point for businesses who have been investing in green technologies. With consumer attention being drawn to the effects of single-use plastics so significantly in the last few years, it’s great to see the government taking the issue seriously and incentivising real investment to tackle the issue. We look forward to seeing the beneficial impact of the tax as companies prepare for April 2022.”

In addition to the plastic packaging tax, the Chancellor has pledged to invest over £900 million to ensure UK businesses are leading the way in high-potential technologies, ranging from nuclear fusion to electric vehicles and life sciences – with part of this fund contributing to a wider investment of up to £1 billion to develop UK supply chains for the large-scale production of electric vehicles.

As the automotive industry races to increase sales of electric vehicles in order to phase out petrol/diesel models by 2040, the 2020 Budget emphasises the government’s efforts to provide a boost to innovative businesses to develop greener technologies and help lower vehicles emissions in the UK.

Matt Boyle OBE, former CEO of Sevcon Inc which is now a division of BorgWarner, and Challenge Director of Driving the Electric Revolution, is presently engaged in growing a UK manufacturing capability for the electrification of transport. Reacting to the Chancellor’s pledge of a £900 million fund for research into nuclear fusion, space and electric vehicles, Matt said: “Focusing this investment on bringing these technologies to market will mean we are providers of solutions rather than simply consumers. We will lead the world rather than follow.”

Sean Leach, a partner at Mathys & Squire who worked with Sevcon Inc prior to its successful acquisition by BorgWarner, added: “British engineers lead innovation in battery technology, electric motors, and drives. This is a massive opportunity to advance that lead. To gain most from it will require a proactive new approach to protecting British intellectual property, and a shift in our engineering culture to put more emphasis on IP, just as our successful German counterparts always have done.”

While clean-tech innovators such as Martin Atkins and Matt Boyle OBE are pleased with aspects of the Budget proposal which encourage greener technology, the announced cut to the so-called entrepreneurs’ tax relief is viewed by some as the Chancellor stifling entrepreneurialism.

Andrew White, who has many years’ experience of providing IP advice and guidance to startups and SMEs looking for funding or growth, comments: “All it really means is that the incentive for UK founders to base their companies in the UK is reduced. The relief is still high enough to incentivise the creation of innovative startups.

“Perhaps more interesting is the increase in the R&D tax credit rate from 12 to 13%. This will be a welcome bonus to hundreds of our clients claiming these tax credits and using them to plough capital back into their business and fund further R&D.” Reflecting on the 2020 Budget, what does stand out is that there has never been a better time for innovation in the green sectors, with significant funding being announced for green transport solutions and other green endeavours.

This article has was published in Cleantech Business News.

A version of this article, specifically relating to plastic recycling in the food and drink industry, was published in Food and Drink Network UK in April 2020 – click here to read in full.