NBC highlights wholesalers’ financial concerns about Deposit Return Scheme

National Buying Consortium (NBC) has welcomed the aims of the UK Deposit Return Scheme (DRS) while warning that the financial impact on wholesale, cash & carry and foodservice distributors must not be underestimated.

David Lunt, spokesperson for National Buying Consortium, said: “Our members fully recognise the environmental purpose of DRS and the importance of encouraging higher return and recycling rates. However, for wholesalers the question is not simply whether the deposit is recoverable in theory, but how it is funded in practice.

“Members may have to pay deposits to suppliers before they recover those sums from customers, creating a real cashflow challenge at launch and during seasonal trading peaks.”

The buying group said that the deposit element could increase gross invoice values without adding margin, meaning wholesalers may need higher credit facilities from suppliers and stronger controls over trade accounts. Orders that previously sat comfortably within supplier credit limits could exceed those limits once a 20p deposit is applied to every eligible unit.

NBC also highlighted concern about unsecured customer credit risk. If a customer delays payment or defaults, the wholesaler may still have funded the deposit upstream while carrying the enlarged debtor balance downstream.

Joe Marlow, managing director of Spectrum Foodservice and a director of NBC, said: “Foodservice wholesalers operate on tight margins and depend on reliable cash collection. DRS has worthwhile aims, but the deposit value will sit on invoices, stock and customer accounts in a way that could materially change day-to-day cash requirements.

“Businesses need clarity from suppliers, software providers and scheme administrators so they can plan properly.”

NBC is encouraging members to review ERP and invoicing systems, model the additional working-capital requirement, speak to suppliers about credit-limit headroom and reassess customer payment terms before the scheme goes live.

Lunt added: “The industry supports practical action to improve recycling, but it is essential that the wholesale route to market is recognised. Deposits may be neutral in accounting terms, but they are not neutral in cashflow terms.

“Without sensible preparation on credit limits, debtor exposure and systems readiness, the burden could fall disproportionately on the businesses that keep independent retailers, caterers and hospitality operators supplied.”

NBC said that early engagement will be essential to ensure the scheme achieves its environmental aims without creating avoidable liquidity pressure for distributors and their customers.