Deposit Level and Structure Announced by Exchange for Change

Exchange for Change has concluded that a flat 20p deposit for all in-scope containers represents the most appropriate and robust approach for the UK Deposit Return Scheme at launch.

A flat deposit structure has been selected in light of strong industry support during the second consultation period, its operational simplicity, and the characteristics of the UK market, where approximately 85% of in-scope containers are 500ml or less.

The Board’s decision on the deposit level is primarily driven by the need to ensure a high level of confidence in achieving the mandated 90% return rate by Year 3 and sustaining this level thereafter, as the key long-term objective of the scheme. As such, a 20p deposit is considered to provide greater assurance of achieving and maintaining this target compared to lower alternatives.

Deposit setting process

As part of the deposit structure and value-setting exercise, Exchange for Change has followed a structured process to ensure that decisions were informed by robust evidence, thorough analysis, and stakeholder input.
This process comprised:

1. an initial evidence-gathering phase, including international benchmarking of deposit levels and return rates across European schemes; a nationally representative consumer survey using the Gabor-Granger pricing methodology to assess price sensitivity to deposit levels ranging from 10p to 30p; and insights and input from industry stakeholders affected by the scheme;
2. an assessment of the collated evidence by the Exchange for Change Board Fees Committee, and the development of an initial recommendation;
3. consultation on this initial recommendation with relevant industry and consumer stakeholders between 10th and 31st March;
4. full Board consideration of consultation feedback, followed by a vote on the final deposit value and structure.

Flat vs variable deposit structure

Overall, stakeholders responding to the consultation expressed broad support for a flat deposit structure. However, a subset of stakeholders continued to advocate for a variable deposit model and provided additional supporting evidence.

Stakeholders in favour of a variable deposit emphasised that higher deposit levels for larger containers could better reflect both the volume of product consumed and the amount of material used (e.g. PET plastic), thereby strengthening the link between deposit value and environmental impact. It would also have the impact of limiting the variable ‘deposit per ml’ which is introduced across container sizes with a flat deposit structure. Stakeholders additionally noted that the Republic of Ireland successfully implemented a variable deposit structure without significant communication challenges.

The Exchange for Change Board accepted all of these arguments but recognised that these needed to be balanced against the benefits of a flat deposit structure and the significant preference from industry stakeholders for this approach. Return point operators and wholesalers consistently and unanimously supported a flat deposit, while producers expressed more varied views for their preference. Operational simplicity was the key argument in favour of a flat deposit, as it reduces complexity across a number of practical areas. This includes simplifying EPOS systems, shelf labelling, financial reporting and compliance processes, as well as reducing the burden of staff training. It also helps to minimise point-of sale queries and disputes and enables easier refund calculations for manual return point operators. These benefits are particularly important for retailers – especially small convenience stores and manual return points – as well as for wholesalers and the wider supply chain.

An additional key consideration for Exchange for Change was that the UK drinks market is heavily skewed towards smaller containers, with approximately 85% of in-scope items estimated to be 500ml or less. As a result, a variable deposit structure would, in practice, operate largely as a single deposit set at a lower level, making the key consideration the appropriate deposit level for these smaller containers. Furthermore, as highlighted in the deposit recommendation paper, return rate challenges are more pronounced for smaller containers, which are more likely to be consumed ‘on the go’. Setting a lower deposit level for these items would therefore reduce the incentive to return the containers that are inherently more difficult to capture and most commonly associated with litter, thereby proving counterintuitive.

In addition, whilst the scheme in the Republic of Ireland demonstrates that communication challenges relating to a variable deposit can be overcome, a flat deposit is nonetheless more straight forward in aiding communication and consumer understanding, which are critical to driving initial participation and return rates.

Based on these considerations, Exchange for Change has decided to proceed with its initial recommendation to implement a flat deposit structure (i.e. a single deposit level for all in-scope containers).

Irish interoperability

As noted in the recommendation paper, interoperability and operational alignment with Re-turn, the Deposit Return Scheme in the Republic of Ireland, is a key objective for Exchange for Change. EFC will therefore continue to engage actively with Re-Turn to identify potential challenges and solutions, with more detailed interoperability policies to be developed and shared in due course.

Given that this topic was highlighted by some stakeholders through feedback to the recent consultation, EFC has considered and responded to the key considerations raised:

Barcode alignment and SKU duplication

Stakeholders highlighted a desire to minimise SKU duplication across the island of Ireland to reflect operational practicalities and product ranges. Exchange for Change will require UK specific barcodes unless producers are paying via a surcharge to utilise international  barcodes. Any discussions around the acceptance of particular SKUs across Ireland would be managed via separate discussions with Re-Turn for which the deposit level is not the only factor (e.g. shared RVM whitelists, financial reconciliations, Ireland specific approaches to international barcodes). These considerations are still live and are not precluded by any particular approach on deposit level and structure.

Cross-border fraud risk

Stakeholders also raised considerations regarding the potential for fraud between Northern Ireland and the Republic of Ireland. As noted in the recommendation paper, current evidence suggests that cross-border fraud remains limited, despite an existing price differential of approximately 15-25p – higher than the expected differential following the introduction of a deposit in Northern Ireland. Crucially, regardless of any differences in deposit structure or levels between the two schemes, ongoing collaboration, alignment, and data sharing between Re-turn and EFC will be key to effectively managing fraud risks. As such, full alignment of
deposit levels is not seen as a prerequisite for mitigating cross-border fraud.

Overarching Conclusion

Exchange for Change has concluded that a flat 20p deposit level for all in-scope containers represents the most appropriate and robust approach for the UK Deposit Return Scheme at launch. The primary factor behind this conclusion is the need to set a deposit level that is sufficient to incentivise returns and achieve the mandated 90% return rate by Year 3, while also providing a durable incentive to sustain high levels of return over the longer term. This decision is consistent with the initial recommendation consulted on in March, which received strong overall support from stakeholders.

The consultation process also highlighted a number of important considerations, including the relationship between deposit level and return rates, the potential for short-term market impacts, and interoperability with the Republic of Ireland. These factors required careful re-evaluation by the Board and involved a series of informed judgements, particularly where evidence was not definitive.

Having considered the full range of evidence, stakeholder input, and long-term scheme objectives, the Exchange for Change Board has voted to proceed with the initial recommendation of a 20p flat deposit.