MINISTERS in Scotland are facing compensation claims worth millions of pounds from businesses over the deposit return scheme if, as is now likely, it does not go ahead.

Organisations representing producers, suppliers, retailers as well as licensed premises say they will be demanding money back for their members that they spent preparing for the recycling initiative if the initiative is axed.

The scheme, which met fierce resistance from businesses across Scotland amid concerns over increase in operating costs, appears on course to be abandoned after the UK Government has refused to give the Scottish Government the green light.

First Minister Humza Yousaf last month postponed the introduction of the scheme from August to next March, and later changes were announced including removing minature containers from it. Producers that sell fewer than 5000 units per year were also excluded in a move would would see craft brewers exempt.

Competition rules set under the Internal Market Act (IMA) ensure all businesses across the UK face the same regulations to prevent firms in one part being advantaged or disadvantaged.

READ MORE: Rishi Sunak urged to give go ahead to Scotland's deposit return scheme

The Scottish Government required an exemption to the IMA for the recycling programme to proceed north of the border in advance of a similar UK wide scheme being launched in 2025.

Ministers in Edinburgh formally requested the exemption in March but the UK Government has refused to grant it saying it "hasn't been possible" to "fully assess the impacts of the exclusion request on cross-UK trade, firms and consumers".

Lorna Slater, the circular economy minister responsible for the scheme's delivery, said on Thursday the exemption was "essential" to the scheme proceeding and said if the Scottish Government hadn't got one by the end of this month, it could mean the scheme is “unviable”.

It is understood that such a decision is unlikely within this timeframe.

Colin Wilkinson, managing director of the Scottish Licensed Trade Association, argued the Scottish Government should have made sure it had got the IMA exemption before it started to proceed with the scheme. 

READ MORE: Deposit return scheme could be axed by end of May without exemption

“This gets more farcical by the day. In my view, the Internal Market Act (IMA) issue is like building a 20-storey tower block then applying for retrospective planning permission. Who would be so presumptuous?

“Lorna Slater has effectively torpedoed the scheme. Businesses have already pulled resources from preparing for the scheme and it is unlikely they’ll revisit it now until the IMA situation is resolved – if it ever is – before the end of the month.

“SLTA believes that supermarkets may be looking at removing drinks sales from home deliveries so they don’t then need to comply with takeback regulations. You can understand why – but what happens to people who rely on home deliveries? It’s another potential nail in the coffin for the farce that is DRS.

“Earlier this month, we said that while we welcome the fact the scheme’s implementation has been paused until March 2024, it is imperative that this should be used as a window of opportunity to revisit DRS and make it both workable and practicable for both businesses and consumers.

READ MORE: Lorna Slater unveils major changes to deposit return scheme

“If the scheme is cancelled and millions of pounds wasted, the Scottish Government will have to brace itself for the compensation claims that will inevitably start pouring in.”

Mo Razzaq, national deputy vice president, of the Federation of Independent Retailers, said: “A deposit scheme is right for our planet, and we hope it is launched in some shape or form before too long. Clearly however the present scheme is deeply flawed.

"It has failed to enlist the vast majority of small shops because the Scottish Government has not joined Ireland in offering them financial help to lease machines to process the empty bottles and cans.

"And it has failed to offer the minority who did take out leasing contracts, compensation for the money lost because the scheme has been delayed seven months - and possibly longer. The Scottish Government has a mountain to climb to ensure small shops engage in DRS and make it a success."

He said his organisation would be demanding compensation from the Scottish Government.

"Many members have already entered into contracts for machines and have spent money on altering the layouts of their stores ahead of the previously expected August 2023 launch," he said.

"We were calling for compensation when the delay to next March was announced and would certainly expect it if the scheme is halted."

Colin Borland, director of the Federation of Small Businesses in Scotland, said firms would be relieved that the scheme now looks set to be axed.

"I think people will breathe a sigh of relief if it doesn't go ahead and then we need to look at things properly," he said.

"We all want recycling rates to improve. We all believe it should be as easy as possible for the consumer to [recycle], so how do we do it?


Scotland's Deposit Return Scheme was to be introduced this August but its introduction was delayed until March next year. Minister Lorna Slater has now warned it may not go ahead.

"We have the UK Government committed to a scheme to come in in 2025 so why not let us have a single UK wide scheme that works for everyone? There were big big issues with this scheme as it stands and I am not sure we can solve them."

He added: "If it does go we will be asking some hard questions around being compensated."

The FSB said there had been 664 registrations to the scheme, around 17 per cent of the sector with registrations costing £365 a year.

Circular Economy Minister Lorna Slater said: "We have engaged with the UK Government in good faith on the exclusion for Scotland’s deposit return scheme for nearly two years now.

"The UK government needs to do the right thing and agree an exclusion now to give businesses the certainty needed to prepare for the launch of the scheme in March.

“We are grateful to all businesses for the investment they have made in preparing for Scotland’s deposit return scheme. This investment will be important for the success of the scheme.

“The UK Government will be responsible for their decision, and any implications it will have for all those businesses that would lose significant investment.”

On the costs of the scheme to date, a Scottish Government spokesman said: “All operational costs of running the scheme will be met by industry, and hundreds of millions of pounds of private investment has already been made.

“Scotland’s deposit return scheme is a priority project for this government and will be a major part of our efforts to reduce littering, cut emissions, and increase recycling.

“Since 2018, the Scottish Government has spent £218,565.83 which includes costs associated with consultation, publication of the 2020 and 2022 Regulations and associated documents, evaluations, independent reviews and assurance.”

Earlier today the Tories said the Scottish Government is "attempting to stoke a constitutional grievance" over the scheme.

The DRS would introduce a 20p deposit on the price of drinks in cans and bottles which is repaid to the consumer when they are returned to a retailer or a reverse vending machine.

The scheme has come under fire from business groups and when Humza Yousaf became First Minister he delayed its introduction from this August until March next year.

Conservative MSP Maurice Golden dismissed Ms Slater's claims as a "red herring", saying that if the scheme failed it would be the Scottish Government's fault.

He told the BBC's Good Morning Scotland programme on Friday: "It's an utterly bizarre intervention, to be honest, and it's a red herring on the exemption.

"My understanding is that while an exemption would be welcome, the financial viability of this scheme is not encroached upon by an exemption from the Internal Market Act."

He continued: "This is again Lorna Slater and the Scottish Government attempting to stoke constitutional grievance."

Mr Golden said everyone wanted to see the DRS operate successfully and that Ms Slater had decided the scheme would be "too difficult".

Pressed on why the UK Government had not yet given an exemption under the IMA, Mr Golden said there are not yet enough details available.

On Thursday, Ms Slater said: "We have engaged with the UK Government in good faith on the exclusion for Scotland's deposit return scheme for nearly two years now.

"Despite following the mutually agreed process, we have still to be given necessary assurances that this will be provided in good time.

"This is creating uncertainty and confusion for all the businesses that have worked so hard to prepare for the scheme going live.

"I urge the UK Government to agree the exclusion by the end of May at the latest.
"Doing so is absolutely essential to the successful delivery of the scheme."