Deal or no deal

Written by: Robert Fell | Published:

The Scrap Metal Dealers Act has had some success in reducing criminal trade, but lack of government will – and declining police budgets – are preventing it from eradicating illegal cash payments. Robert Fell, chief executive of the British Metals Recycling Association, explains

It has been nearly three years since the Scrap Metal Dealers Act (SMDA) was implemented. During that time, we have seen an election that returned a massive Conservative majority, an alarming contraction in headcount across many government departments, the last vestiges of a UK-based steel industry put up for sale and, of course, the country vote to leave the European Union.

While it is too early to guess let alone understand what the likely consequences of Brexit will be for the UK and the metals recycling industry, now is perhaps the ideal time to examine the highs and lows wrought by the SMDA.

In fact, just before the EU Referendum, the British Metals Recycling Association (BMRA) team had a meeting with representatives from the Home Office who agreed to begin the review process of the Act, due to start in 2018, ahead of schedule.

During this meeting, we were able to remind those at the table of the UK metals recycling industry’s significant contribution to UK plc.

We employ upwards of 10,000 people in an industry worth well over £5 billion. Of the 10mt of metals recycled, 8mt was exported last year; we are one of the largest exporters of scrap to countries outside the European Union. In terms of tax alone, the industry’s contribution to the Treasury’s coffers is noteworthy. At the same time, we were able to share a number of particular areas of concern linked to the Act that are fundamentally impacting our members’ ability to do business. In short, the level of enforcement of the cash ban has been disappointing and we have seen scant control of unlicensed dealers.

Given their funding has been steadily reduced, we do not feel that the blame for this lack of enforcement can be laid at the door of our colleagues in the various police services and local authorities. Rather that continued government-led budget cuts have heavily impacted their ability to go after cash-payers and illegal yards.

For example, according to a Freedom of Information request response, since the Act was implemented just nine defendants across England in 2014 and 2015 have been proceeded against at magistrates’ courts for buying scrap metal for cash.

This apathy towards enforcement at a government level has led to many in the industry questioning whether, if it is not being properly enforced, the Act should be repealed. Having said that I think it fair to say that currently this still remains the minority view.

Reaching this stage

So how did we get to the point where the word ‘repeal’ is even being thought, let alone said out loud?

There is no denying that the cash ban has impacted scrap metal dealers’ business model. Surprisingly it is the lower-value deals that have been affected or curtailed the most. Whereas before the ban, members could pay cash for single, low-value items, now the cost of processing the transaction, be it by cheque or electronic payment, often costs more than the value of the metals offered for sale. While we recognise that the cash ban has led to a loss of smaller transactions, a de minimis on cash payments would have been open to abuse.

In fact, one of the main reasons for the implementation of the Act and the introduction of the cash ban was to reduce the market for stolen metal.

In the run-up to the 2012 Olympic Games in London, there was real concern that endemic levels of metal theft of transport system cable in particular would negatively impact the success of the Games.

While it is true to say that since the introduction of the SMDA, metal theft figures have steadily declined, this decline is not purely down to the cash ban and increased identification requirements. In simple terms, in the face of a global slump in the price of metals, markedly less metal is being traded.

In short, with smaller margins there is less incentive for criminals to steal metals and, unlike legal entities, they are unlikely to store it while waiting for a better price.

Metal theft

Nevertheless, the BMRA, also regularly targeted by thieves, accept that while greatly reduced, metal theft is still an issue. It is an important issue and one that we want to fight alongside the police services.

For example, we recently issued an alert with South Cambridgeshire police about the theft of 50m2 sections of lead being stolen from a cluster of churches in the country.

Furthermore, recognising that dealers that are willing to pay cash are less likely to be properly licensed and more likely to accept stolen metal, we have also set up a dedicated anonymous reporting system so scrap metal dealers and members of the public can report yards offering cash.

However, the issue still comes back to enforcement. There is clearly a problem with unscrupulous yards accepting stolen metal, paying cash, not doing their due diligence on customers and not being caught.

We will continue to work closely with contacts in the police services to identify ways to tackle cash payments more effectively but, until there is greater support in government halls not to mention budget, it is hard to know how we can make headway.

Yet, while we wait for our partners to be given the support to focus on enforcement, there are perhaps one or two simple steps that might just strengthen the Act and lessen the calls for it to be repealed.

Taking a tougher stance

Before the cash ban and identify checks were required under the SMDA, there was a thriving trade in surplus metals from small businesses such as engineering works, maintenance firms and demolition companies exchanged for untraceable and untaxed cash. This sort of trade had a long history and many of those who indulged in it have been reluctant to give up cash.

One of the simplest changes that we are calling for when the SMDA comes up for review, therefore, is to make both sides of the metal sale transaction illegal. While one could argue that it is technically aiding and abetting a criminal act by accepting cash right now, making it illegal to accept cash would remove any doubt.

Hopefully, the demand for this type of cash trade would then diminish significantly as companies and individuals would not want to risk prosecution for the sake of not declaring income from their scrap metal. At the same time, we would like to see some of the definitions regarding who is legally required to be licensed as a scrap metal dealer tightened.

We are aware of companies whose main business might not be metals recycling and so don’t have to abide by the SMDA because they fall through a loophole, but who actually shift larger volumes than some of our members. This situation further eradicates any semblance of a level playing field and only hurts those dealers abiding by the rules and spirit of the Act.

Where next?

Well, it is interesting that countries such as Denmark are reported to be flirting with the idea of a cash ban across society. Such a dramatic move could, so proponents advise, enable a country to control its economy more carefully.

It could be argued that it would certainly eradicate the risk of forgery, and eliminate much of the black economy, not to mention reduce criminal activity.

However, it does seem a rather extreme approach and not one I can realistically see in the UK’s future.

I for one would rather pin my hopes on working with government, police and local authorities to enforce what could be a very robust piece of legislation. But, if the government continues to be disinclined to enforce the Act, in the end one can only question its worth.

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