German mill papers over UK cracks

Government files have to be shipped abroad to be recycled, reports Mark Leftly

Every month, 42,000 boxes containing more than 100 million sheets of A4 paper are shipped to the UK from a mill 38 miles from Hamburg. They started life as confidential tax files and highly sensitive central British government documents, but have been recycled alongside the paper used for the German editions of FHM and Penthouse magazines.

The latter, with a bare-chested blonde on the cover, sits on the bottom shelf of a cabinet next to two similarly themed titles at the Steinbeis mill on the right bank of the Lower Elbe river.

Government files end up here as there is no mill left in the UK that can do what Steinbeis does, which is to ensure that every shred of paper in the 15ft stacks bundled outside the facility is tracked and reformed to be used once again by the same civil servants and ministers.

"This is where the magic happens," chuckles Andy Craig, the impressively moustached commercial director of Norfolk-based office2office. Through its Banner Business Services division, which was part of Her Majesty's Stationery Office prior to privatisation in 1996, the London-listed group has the £35m annual contract to run this recycling programme, known as "closed loop".

This is part of the attempt by Cabinet Office minister Francis Maude to cut costs at every possible level of government. This paper is cheaper than "virgin" bright white paper and ensures that confidential information is destroyed rather than falls into untrustworthy hands: civil servants man-mark Banner's workers as they shred the paper in the car parks outside government buildings.

The process is also environmentally friendly, saving 226 million litres of water used by virgin paper since the contract started last year, and no trees are chopped down in the process. It has reduced CO2 emissions by 70 per cent, a small but significant help for a government that harps on about meeting strict emission reduction targets.

What Banner really wants, though, is a similar mill in the UK. Once a thriving industry in Britain, paper-making is struggling badly, as best shown by the closure of the Sittingbourne paper mill in 2007, just 299 years after Peter Archer produced the first hand-made sheet to be recorded in the area.

The cost of a new mill is prohibitive, around £100m. With no obvious sources of substantial private-sector investment, it would take a government loan or joint venture to build the operation, most probably somewhere in Essex, and it would be a decade before the capital was repaid.

However, Banner's managing director, Richard Costin, estimates that around 200 jobs would be created once the supply chain was taken into account. As well as Maude, who rather understatedly admits that talking about pens and paper is "not glamorous" but argues that the contracts will save taxpayers "millions of pounds", big corporates like high street retailer Marks & Spencer are thinking of signing up.

Costin says: "What is needed is [guaranteed] volume. Everything has gone overseas, so the paper mills in the UK don't recycle. They either need to diversify into recycling or new mills need to be pushed through European investors."

As the paper mill industry grew and consolidated, so it centralised its operations. A century ago, Sittingbourne was the largest paper mill in Europe and a major supplier to Fleet Street, going on to survive two world wars but not the ownership of M-Real.

The Finnish group closed the mill after seven years of ownership, having failed to make the operation profitable after more than £25m of investment. In an age of austerity, that might be the one stark warning that prevents the revival of British paper mills.