Plasrecycle, a South East London-based recycling operation, has gone into administration with the loss of 20 jobs, after running out of cash.
The Woolwich-based firm, which became operational in 2013, claimed to be the UK's “first dedicated plant for recycling post-consumer shopping bags and films collected at the kerbside from households”.
The operation is currently being run by 16 remaining members of staff, while a buyer is sought.
Joint administrators Ernst & Young (E&Y) said the firm had been seeking £6m to improve efficiencies and increase capacity.
In a statement it went on: “However, due to the extent of the ongoing losses at the lower levels of production and the level of existing debt used to fund the start-up losses, it was not possible to obtain this investment and the company effectively ran out of cash.
“Plasrecycle will continue to convert existing work in progress into finished product but not convert new raw material due to the level of losses in processing.
“The administrators are seeking expressions of interest in the company and its assets and wish to conclude an early sale before production ceases.”
Hunter Kelly, joint administrator, said: “The cost and time to get this plant operational was significantly more than originally envisaged, leading to greater levels of debt. However, with its unique process, Plasrecycle has all the fundamentals to be a significantly profitable business.
“We have had good levels of interest and would encourage interested parties to get in touch as soon as possible.”
A further statement from E&Y said: “The total liabilities of the business are estimated to be £18m, but the vast majority of this [comprise] loans provided by the major shareholders to invest in the site, its equipment and fund trading losses to make the business viable.”
Plasrecycle became operational in September 2013 with an investment of £12m, which the firm said came primarily from private investment but also with backing from public sector bodies.
One investor, private equity firm Foresight Group, which is based in the Shard in central London, invested £7.5m in Plasrecycle when it was a start-up, as part of its Environmental Fund. Foresight had also invested £8.3m in Closed Loop Recycling, the collapsed Dagenham-based plastic bottle recycler.
Records suggest Foresight owns 31% of Plasrecycle's ordinary stock, while the largest shareholder is believed to be John Duncan Grierson, Plasrecycle's founder and a director of the firm, with nearly 46%.
Wrap, the former public sector waste organisation, now a charity, said it had lent £1m to Plasrecycle through its Accelerated Growth Fund. A spokesperson for Wrap said it was unable to comment on the status of its loan until advised further by the administrators.
Earlier this year Plasrecycle announced it planned to launch two higher quality grades of LDPE plastic recyclate pellets after what it said would be a period of expansion and further investment in its facilities.
Its 30,480 sq metre Woolwich facility was expected to process 50,000 tonnes annually.