Hargreaves signs 15-year Scottish deposit return logistics contract

Hargreaves Services has signed a 15-year agreement with Australian recycling and resource recovery business Re.Group to provide collection, transport and transfer station services for Scotland’s deposit return scheme. The contract replaces the provisional preferred bidder status announced on 30 September with a signed operating commitment. Hargreaves will collect returned containers from retailers, consolidate the material and transfer it to designated processing facilities.

The agreement was confirmed on 22 October and covers Scottish operations only. Hargreaves expects work to commence in October 2027, alongside the planned introduction of deposit return arrangements across England, Scotland and Northern Ireland. The appointment concerns the Scottish operation rather than a nationwide contract for all three jurisdictions. Hargreaves has not disclosed the total contract value, expected annual container volumes, required vehicle fleet or the number and location of transfer stations it will operate.

Scotland’s scheme is scheduled to apply a 20p refundable deposit to eligible single-use PET plastic, aluminium and steel drinks containers between 150ml and three litres. Consumers recover the deposit by returning those containers to designated collection points, including participating retailers. From a logistics perspective, the resulting movement of empty containers runs in the opposite direction to the normal supply of filled products. Retailers need returns removed at appropriate intervals, while the recycling operator requires the collected material to reach processing locations in a controlled and accountable flow. Hargreaves’ role is in that reverse movement of empties, not beverage production or the original distribution of filled products.

Empty containers are relatively light, but their uncompacted volume can fill vehicle and storage space quickly. This makes collection frequency, compaction arrangements and the positioning of transfer stations important operational design choices. Collections must be planned around return point capacity, vehicle access and the frequency with which containers accumulate. The announcement does not specify vehicle types, compaction equipment, collection intervals or the division of material-sorting responsibilities. None can yet be attributed to the contract as an agreed operating feature.

Transfer stations will provide an intermediate function between retail collection and downstream processing. In such networks, incoming material can be received, consolidated and prepared for onward movement, allowing collection vehicles to serve multiple return points without each trip ending at a distant processing facility. The arrangement can reduce unnecessary long-distance movements by local collection vehicles, although the benefit depends on the placement and permitted activities of the stations. Hargreaves has not identified the planned network or provided a quantified emissions or distance-saving forecast for this contract.

Accountability for returned containers is also a practical requirement in a deposit system because physical material flows need to be reconciled with return transactions and the scheme’s rules. Records of material received, transferred and delivered help operators distinguish containers still in transit from those accepted into processing. Hargreaves has not specified the tracking, counting or reconciliation technology it will use, or claimed any measured improvement in fraud control or collection accuracy.

The contract includes annual consumer price index-linked adjustments and mechanisms that take account of changes in fuel costs. Hargreaves says these terms provide greater revenue visibility and help protect margins over the life of the contract. The terms matter because collection and transport services can be exposed to changes in wages, vehicle running costs and the price of diesel or other energy. Indexation does not eliminate every operating risk, however, and the announcement does not disclose the contract’s payment formula or the extent to which all cost increases can be passed through.

Hargreaves is developing its Environmental Services activities alongside its existing work in infrastructure, industrial operations, materials handling and logistics. Simon Hicks, chief executive of Hargreaves Services, described the award as a step forward for its Environmental Services business and an opportunity to develop recycling activities. The assessment remains management’s view of the opportunity; the commercial results will depend on successful mobilisation, service delivery and the volume of returns after the scheme begins operating.

The financial effect will not coincide with the date on which the agreement was signed. Hargreaves expects a positive contribution during its financial year ending 31 May 2028, after the planned October 2027 start, with a fuller effect in the following financial year. Its board expects group revenue and profit before tax for the year ending 31 May 2029 to be moderately ahead of pre-announcement market expectations. The earlier consensus benchmarks were £323.2 million in revenue and £20.4 million in underlying profit before tax for FY29. They are neither a revised company forecast nor the value of the Re.Group contract.

For FY28, the equivalent pre-announcement consensus figures were £309.2 million of revenue and £18.8 million of underlying profit before tax. Hargreaves expects the new services to contribute positively in that year, but it did not provide a separate earnings estimate for the contract or a definitive revised group forecast. Financial guidance is also subject to the delivery timetable and operating conditions that will become clearer when the service network is commissioned. The announcement offers commercial visibility over a long contract term without establishing guaranteed volumes or annual profit.

The programme will require coordination between the retail sites accepting returns, the scheme organisation, Re.Group, Hargreaves and processing facilities. Missed collection windows could create storage pressure at return points, while poor scheduling at transfer stations could cause unnecessary vehicle waits or disrupt onward material flows. These are generic operating dependencies of a distributed reverse logistics system, not documented failures or current problems in the Scottish rollout. The scope of the agreement establishes responsibility for collection and movement; the detailed operating design and performance targets remain undisclosed.

The contract is a new and more definite milestone than September’s preferred bidder decision, when Hargreaves was still working to finalise terms. With its Scottish logistics appointment now signed, the next milestones are mobilisation and the planned start of collections in October 2027. How many containers the network ultimately handles, what resources it requires and how the operation performs against cost and recycling objectives can only be assessed after further contract details and operating data become available.