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Waste management and recycling industry remains positive despite GDP shrink

Firms in the waste management and recycling industry are remaining positive about business despite news that gross domestic product (GDP) dropped in the last quarter by 0.5%.

GDP is used to measure the rate of economic growth in the UK. The news was a shock to the markets, which had predicted growth of between 0.3% and 0.5%. Ministers blamed the severe winter weather for affecting markets.

In addition, there is concern about the possibility of a ‘double dip’ recession. This is because if the first quarter of 2011 also shows a shrink in GDP, the UK will officially have entered back into the recession.

Plastic bottle recycler Closed Loop Recycling managing director Chris Dow said: “Everyone’s using the term ‘double dip’. But I don’t think it will happen because we have seen increasing demand in general in our industry. It is disappointing when I see the Government increase tax (VAT was upped to 20% on 4 Jan) because I would rather see inflation left in the hands of the consumer than the Government. If people have money then they will spend it, which increases demand and therefore growth.”

Recycling equipment manufacturer Summit Recycling Systems managing director Sam Hill said: “We were certainly affected by the snow at the end of 2010. We had a period when we worked shorter days because a lot of customers couldn’t actually make it in. But we don’t feel that it has led to any cancelled work, it is more likely that it has just delayed projects, so those December plans are instead coming through in January.

“We did see a slight downturn at the end of last year but a lot of customers we have spoken to have said that they’ve never been busier. Only a small part of them are saying that it is quite tough at the moment, these tend to be people in the engineering and automotive sector possibly because they no longer have the scrappage scheme to help.”

In the past, waste arisings have been seen as an indicator of economic growth.  However, over the past few years arisings have been gradually decreasing as the economy has grown and emerged from the recession. It is not clear why this is.

Additionally, it seems companies in the waste and recycling industry are still having difficulty accessing borrowing. Dow said: “The banks are nowhere near the point we want them to be to provide sensible levels of debt. We are still seeing an aversion to provision of debt based on contracts.”

In July last year, Dow announced plans to build further recycling facilities across the country, but these are proving difficult to put in place due to the lack of lending from banks. “Plans are definitely to continue to grow the business but one of the issues an industry like ours has is accessing debt. We work on contracts, which vary; some last for five to six years and some one to two years . Banks are saying they want greater security with longer contracts but we’re trying to explain that it doesn’t work that way in this industry. We cannot offer 25-year contracts like a private finance initiative could. All of our numbers are right we just need to attract investment,” he said.

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