When does it make sense to grow circular industries in the UK?  – Inside track

Trade policy is high on the agenda. From the impacts of Brexit and tariffs, to growing global protectionism and alarming American expansionism. As a result, the government is rethinking how much the UK should rely on international supply chains compared to producing closer to home. 

This is highly relevant to the transition to a circular economy, with its burgeoning global market predicted to boost GDP by around three per cent by 2050. The UK is due to launch its Circular Economy Growth Plan soon, as onshoring more circular activities — such as recycling, repair or remanufacturing — offers promising growth and job opportunities. 

The understanding that there will be economic benefits from this transition is largely based on the assumption that activities like recycling or remanufacturing will grow in the UK. And this should clearly happen. But, in some instances, more circular supply chains could be supported through international trade alone, without onshoring anything to the UK.  

As a ‘middle power’, the UK can’t go completely independent and onshore everything. To ensure it maximises its benefits from this growing market for circular goods and services, it must assess what is best onshored and where it makes sense to trade. 

Trade strategy must strike a balance
These decisions are being taken in a fast shifting global context. Even before President Trump’s invasion of Venezuela and renewed interest in acquiring Greenland “one way or another”, US industrial policy — from the Inflation Reduction Act to new tariffs — prompted reflection, retaliation and renewed efforts by countries to protect their domestic industries. The EU, for example, is backing strategic sectors through initiatives like the Critical Raw Materials Act and potential Made in Europe public procurement rules. Against this backdrop, the UK Trade Strategy has been trying to strike a balance: aiming to remain an open trading nation while protecting its economic interests, national security and key industries. 

We assessed the case of EV battery recycling
To help policy makers decide when it makes sense for circular activities to take place in the UK, we have just published a set of suggested criteria. These include factors such as whether the UK has, or could have, competitive advantage; skills, research capability and infrastructure; the extent of the potential market; geopolitical and national security risks; environmental impacts; and effects on product prices and export potential. 

As a test, we applied the criteria to the case of electric vehicle battery recycling and it revealed interesting trade-offs. Relevant to the government’s Industrial Strategy, it’s an area where many of the materials used – including lithium, cobalt and nickel – are critical. The technology is changing rapidly and China dominates, making it challenging to plan for a future recycling industry in the UK. But stricter EU rules of origin for vehicle imports mean the UK will need its own battery production facilities to continue exporting there without facing tariffs. From the 2030s, batteries will have to incorporate recycled content for some critical minerals to even be allowed on the market.  

It reduces reliance on risky supply chains
Once production facilities exist, it makes sense to also co-locate recycling facilities to make use of the nearly infinite recyclability of materials already circulating in the UK in used batteries, and reduce reliance on risky international supply chains.  

We hope these criteria are a useful starting point, but they are just a starting point. They need further development, for instance by adding measurable indicators to establish how different factors should be weighted and more testing on other relevant sectors, such as plastics, aluminium and chemicals. We’d love to speak to anyone interested in developing this work with us. 

To embed these decisions into national strategy, they need to be linked to both trade policy and industrial strategy. Getting it right at this point will help to make the UK’s economy more resilient, competitive and environmentally sustainable.

Photo by MiningWatch Portugal on Unsplash