Packaging EPR brought in disposal fees, but it did not replace the recycling obligation. Large UK producers still have to buy, or otherwise acquire, enough packaging waste recycling notes to cover a share of the packaging they supply, material by material, every year. It is a separate cost from the disposal fee invoice, and in 2026 it has been the harder of the two to predict.
It is mid October, and most finance teams are setting next year's budgets. This post sets out how the PRN obligation is calculated, what the regulators changed for 2026 on 9 October, and how to build a 2027 PRN budget that can be traced back to the packaging that drives it.
What a PRN is now
A PRN, now formally a Packaging Waste Recycling Note, is evidence that a tonne of packaging waste has been recycled by an accredited UK reprocessor. A PERN, a Packaging Waste Export Recycling Note, is the equivalent issued by an accredited exporter, and only once the material has been received by the overseas reprocessor. Either counts towards the obligation for its material.
The notes are no longer handled in the National Packaging Waste Database. Producers and compliance schemes accept them in the EPR for packaging service, through the same Report Packaging Data account used for EPR reporting. NPWD remains available to look up data from earlier years.
Who is obligated, and how the obligation is calculated
Only large producers have a recycling obligation: those with more than £2 million annual turnover and more than 50 tonnes of packaging supplied. Small producers register and report but do not need notes.
The method is set by Schedule 5 of the Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024. For each material, the obligation for a year is the tonnage you supplied in the previous year multiplied by that year's recycling target. The 2027 obligation is therefore your 2026 tonnage, which is being built right now, multiplied by the 2027 targets.
The targets rise every year to 2030, so the number of notes needed goes up even if your packaging does not change. For the two years most budgets are dealing with:
- Plastic - 57% in 2026, 59% in 2027
- Paper, board and fibre-based composite - 77% in 2026, 79% in 2027
- Glass - 76% in 2026, 78% in 2027, with at least 76% and 77% of the glass obligation respectively to be met with re-melt notes
- Aluminium - 62% in 2026, 63% in 2027
- Steel - 81% in 2026, 82% in 2027
- Wood - 46% in 2026, 47% in 2027
Three points are easy to miss. Each material is met separately, so a surplus of paper notes does nothing for a plastic shortfall. The obligation covers all the packaging you supply, not just household packaging, whereas disposal fees apply only to household and commonly binned packaging. And the two are paid separately: a compliance scheme can meet your recycling obligation for you, but it cannot pay your disposal fees.
The obligation for a calendar year has to be met by 31 January of the following year. Notes for waste received or exported in December can be accepted against either that year or the next. Notes for any other month count only towards their own year.
A market, not a rate
Disposal fees are set per tonne and published. PRN prices are not. They are agreed trade by trade between the reprocessors and exporters issuing notes and the schemes and brokers buying them, and they follow supply and demand. Demand is fixed by law: producers' tonnage multiplied by the targets. Supply depends on how much packaging waste is actually recycled or exported in the year. When the two are out of balance, the price moves, and buyers who are still short near the deadline have little room to negotiate.
In 2026 that imbalance was most visible in plastic, where notes traded at record levels through the summer. Different materials behave very differently: a material the UK recycles well beyond its target can be cheap to cover, while one where supply is tight can be expensive, so a single budget line for "PRNs" hides most of what matters.
What the 9 October intervention changes, and what it does not
On 9 October the Environment Agency published a Regulatory Position Statement, RPS 383, which applies in England. The regulators in Scotland, Wales and Northern Ireland are issuing their own statements, so check the one that applies to you. Under RPS 383, for the 2026 compliance year only, the Environment Agency will not normally take enforcement action against a large producer or compliance scheme that meets a reduced share of its obligation for three materials:
- Plastic - at least 83% of the statutory obligation
- Steel - at least 92%
- Wood - at least 90%
The full obligation still applies to every other material. Anyone relying on the RPS has to keep records for five years. And the statutory obligation itself has not changed: a producer that meets only the reduced level will have non-compliance with the recycling obligations recorded on its Certificate of Compliance, even if it meets the conditions of the RPS. The RPS is due to be withdrawn on 31 January 2027.
For budgeting, two conclusions follow. The 2026 outturn may be lower than a full-obligation forecast for plastic, steel and wood, depending on what your scheme decides to buy, so confirm with your scheme which basis it is working to before you accrue. And nothing in the RPS applies to 2027. A 2027 budget should be built on the full statutory obligation unless and until the regulators say otherwise.
Building the 2027 budget
If you belong to a compliance scheme, the scheme meets the obligation on your behalf and recharges the cost, and how it recharges varies from scheme to scheme. The budget should start from a few questions to your scheme: whether the price is fixed or passed through at cost, whether it can change during the year, what margin or fees sit on top, and how December notes and any year-end shortfall are handled.
From there, a defensible PRN budget has four parts:
- Tonnage. Your 2026 supply by material, projected from the months you have to the full year. A business with a seasonal peak in the fourth quarter should project from last year's shape, not straight-line from January to September
- Targets. The 2027 rate for each material, with glass split between the re-melt minimum and the rest, since the two are priced differently
- Price. A range rather than a single number, with the basis written down - a scheme quote, an invoice price or your own assumption - and the date it was set. After a year like 2026, a single point estimate is a forecast of the wrong kind of certainty
- What is already committed. Notes already bought or contracted for, so the budget shows the cost still to come, not the whole obligation at today's price
From a budget line to a cost per component and SKU
A total PRN figure tells finance what to accrue. It does not tell packaging or commercial teams what is driving it, or what a change would save. For that, the cost has to be taken down to the packaging itself.
Every tonne of a component supplied this year adds to next year's obligation for its material. Its PRN cost per unit is its weight, multiplied by next year's target for its material, multiplied by the price. Add the disposal fee, which applies only where the packaging is household or commonly binned and varies with its recyclability rating, and Plastic Packaging Tax on plastic components with less than 30% recycled content, and you have the component's UK compliance cost. Roll that up through the bill of materials and you have the cost per SKU.
Held that way, the figures answer questions a budget line cannot. When plastic notes cost many times what paper notes do, plastic can be a minority of your PRN tonnage and most of your PRN cost, and the SKUs carrying the most plastic carry most of the exposure. A change of material or weight can be valued in pounds per unit and per year before anyone commissions it, using the same prices as the budget.
Tracking variance through the year
A budget set in October will be tested by the market long before the following January. Since May 2026, Defra and the Environment Agency have published a monthly release of packaging waste data reported by reprocessors and exporters, which includes average prices per tonne for PRNs and PERNs by material. It is an average of what was paid in the month, published a few weeks later, so it trails the market when prices move fast. It is still a consistent, public reference to compare your own budget price against.
The useful comparison is not the price on its own but what it does to the outturn: the gap between the market and your budget price, multiplied by the tonnes you still have to buy. A large move on a material you have already covered matters little. A small move on a large open position matters a great deal, and the earlier it reaches finance, the more options there are.
How Merchant Packaging supports this
Merchant Packaging calculates the PRN obligation per material from your previous year's UK dispatches, net of returns, and the Schedule 5 targets, with the glass re-melt minimum shown separately. You record the notes you buy, one at a time or imported from a spreadsheet, and the PRN position shows for each material the obligation, tonnes bought and still to buy, spend so far and the estimated cost to complete. The forecast projects this year's dispatches to the full year, using last year's shape where there is one, to show next year's obligation and cost while it is still being built.
Market prices are imported from the GOV.UK monthly release, and you can hold your own price per material, such as a scheme quote or budget figure. When the market moves past your price by more than a threshold you set (20% by default), your administrators are emailed with the effect on the year's outturn, and each purchase is shown against the market average for its month. Compliance cost combines PRNs, the disposal fee and Plastic Packaging Tax for each component, per unit and over the last twelve months, rolls it up through the bill of materials to each SKU, and offers a what-if for changes of material, weight, recycled content or rating. Every figure is marked as an estimate and says which price it uses. The position works to the full statutory obligation, so a decision to rely on RPS 383 for 2026 is one to take with your scheme.