The country's recycling figure for 2008 is also expected to fall short of initial expectation because of the retreat.

In February last year, it was reported by the Confederation of Paper Industries (CPI) that the UK had recycled 8.6m tonnes of paper and board and was moving quickly towards 9m for 2008.

CPI is now reporting that the initial optimism has been checked because the Far East, by far the UK's biggest customer, has reduced demand.

The UK exports more than half the recovered paper it collects, with the Far East handling around 75% of the 400,000 tonnes per month that is sent out of the country.

Companies have now been hit because there is a glut of recycled paper available from Europe, leading to rapid price collapses.

CPI said that with no obvious signs of Far East buyers returning to the UK market soon, there is a serious possibility that storage of recyclables may end up being a very high risk strategy with huge costs to those requiring it, such as Local Authorities, and a potential knock-on effect for taxpayers.

Even if Far East buyers return to the market quickly, it is very doubtful that prices for the material will be anywhere near where they were through the middle of 2008 and excess stored material is likely to suppress prices for a much longer period, the organisation warned.

Peter Seggie, CPI Recovered Paper Sector Manager, commented: "Increased Far East demand for recovered paper is likely to return in the medium to long term, but this is unlikely to be at the growth levels seen over the last five years.

"The UK must learn from the lessons of these volatile times and, like the banking crisis before it, look at lowering future risks by examining what can be done domestically to make the UK more self-sufficient."

Despite this, current statistics still indicate that 2008 will be a record year for UK recycling.