The complexity of Scotland’s Deposit Return Scheme brings inherent financial risks to hospitality businesses, according to UKHospitality’s Scotland Executive Director Leon Thompson.

The lack of resolution to the issue of VAT paid on deposits will see businesses and consumers paying 24p per container but receiving 20p back, which will see the scheme become another form of taxation during the cost of living crisis, the trade body said in a response to a report by the Cross-Party Group on Beer and Pubs.

Concerns over secure storage, theft of containers, and glass breakage resulting in a loss of deposits also pose a risk to businesses, UKHospitality said.

Members of the Cross-Party Group have called on the Scottish government to clarify and review the net benefits of the scheme. The report also outlines specific concerns over the logistical problems and costs of using glass as well as the impact on Scotland’s small, independent brewers and businesses.

In addition to an urgent review, the report recommends that the Scottish and UK governments work together to align their schemes so that there is a single market for brewers and retailers as opposed to added complexity, costs, and wastage due to three different markets.

Thompson commented: “Given that eventually there will be three separate schemes running across the four nations of the UK, we are working with members to arrive at shared solutions and approaches.

“However, it is clear that all businesses will need to make significant changes to their financial and operating systems in order to comply with the complexity and variance in the regulations. This also threatens the prospect of a dramatic reduction in choice for Scottish customers as businesses withdraw from the market.

“As well as challenges over deposits, it is an important point that DRS is already proving a costly policy for hospitality at a time when operators can least afford it and when businesses already achieve impressive rates of recycling.”

Convenor of the Cross-Party Group, Craig Hoy, said: “Everyone understands that we need to delivery circularity and net zero, but to be successful the scheme has to be effective.

“It’s clear from the evidence we heard that the Scottish DRS is far from ready and if these details are not addressed it will not be viable. Scottish producers and retailers are still recovering from the pandemic and the Ukrainian conflict is hitting supply chains, energy and costs.”