As a nation, we are producing more waste than ever before – and the UK’s traditional management route for waste – landfill – is running out fast. Add the impact of continually evolving and more demanding environmental legislation from the European Union (EU) and the UK Government, and the challenge is clear.
Through the implementation of the EU Landfill Directive and subsequent UK Government legislation, waste to landfill has continued to decrease, falling by exactly a third (33 percent) since 2000 – with a significant decline of 11 percent between 2007 and 2008 from 64 million tonnes of waste to 57 million tonnes. What is perhaps particularly alarming, however, is that even at these ‘reduced’ rates, the total capacity of current UK landfill sites is only estimated to provide approximately eight years of landfill life for non-hazardous wastes at 2008 rates of disposal.
In the past, disposal was the first and only option for dealing with waste, but in more recent years it has become the last-resort option. Consumers have taken umbrage at seeing their beautiful vistas blighted by vast scrapings in the ground, however well they are ultimately returned to the ‘natural state’. The constant stream of waste vehicles driving through the countryside to deliver tonne upon tonne of waste has brought the issue of waste into the consumers’ backyard, and understandably they don’t like it.
Rather than landfill, the emphasis today is centred around reducing waste. The combined effects of landfill tax, the Landfill Allowance Trading Scheme (LATS) and declining capacity for landfill mean that the economics of waste management in the UK is undergoing considerable change and will continue to do so. Indeed it is giving rise to a ‘new’ industry – the emergence of more commercial recycling and re-use schemes, including the further development of energy from waste (EfW) systems.
Key Note, the research agency, reports that the UK waste management market grew by 5.4 percent to £9.34 billion in 2010 and predicts that it will reach £12.25 billion by 2014. Although this is a marked increase, it is interesting to note that the rate of growth predicted is still lower than the average for the four years preceding the recession. The market remains tough, and anyone who still believes the old adage that ‘where there is muck, there’s brass’ might like to think again.
One company feeling the effects of these changes in the industry is Bristol-based Reece Environmental (UK) Limited. The waste management firm is licensed to undertake waste collection and waste disposal and had an annual turnover of £1.5 million, but, despite this apparently healthy cash flow, it failed to meet the agreed terms of a loan facility and accrued debts amounting to approximately £240,000.
Nationwide insolvency practitioners SFP were subsequently appointed Administrators on 27th April, and Simon and Daniel Plant, both licensed members of the Insolvency Practitioners’ Association, are in talks with an interested party for the sale of the business and assets.
Simon Plant, Group Partner at SFP, believes the waste disposal sector is extremely competitive in the current climate with major firms putting a squeeze on margins: “There are many factors that have put pressure on Reece Environmental (UK) Limited, but principally it has run out of cash,” he says. “All too often we see cases where the cash has simply run dry, not necessarily because of a lack of business, but more through poor credit management and failing to keep the cash flowing through the business.”
Simon also believes that there are many businesses out there in different sectors who are experiencing similar issues: “Companies could be making better use of the professional help and advice that is out there, and harnessing the latest cashflow management software to make their businesses stronger,” he says. “Getting the basics right from the start – having appropriate terms of trade and knowing when you are going to get paid for the services you deliver – can be the difference between success and failure. Companies need not end up in administration.”