Defra report SP0577, Costs to the Horticultural Sector of Meeting the UKBAP Target on Peat Use in Horticulture, finds that peat replacement cost the industry £100m from 1999 to 2008, with growing media manufacturers bearing the brunt through product development costs.
It adds that by 2020, peat replacement will cost £26m a year if peat is to be replaced by 75 per cent of other materials - and £81m a year if it is to be replaced by 90 per cent. The 90 per cent figure would also lead to the loss of 247 harvesting jobs.
The report, written by ADAS, says manufacturers that harvest peat from their own moors will see a "fundamental impact" on their businesses. The highest peat replacement costs will be to the mushroom, forced bulb and pot plant sectors because of higher costs than international competition.
It concludes: "It is clear that the costs of peat substitution could be large, rise with reductions in the time in which the transition must take place and require careful consideration when making plans."
NFU horticulture adviser Dr Chris Hartfield warned that replacement costs were unsustainable for the industry. "The report shows costs to the industry to meet any future target will be very high. To take it to the next level, costs increase exponentially. If the Government continues to make peat reduction a policy, it needs to be engaging more actively in sharing costs."
He added: "Growing media is often a loss leader in major retailers. The product has become devalued and that creates real problems for the sector. It is not just a bog-standard product, it is a technical product and a lot of investment has gone into development.
"Defra needs to look at financial incentives for peat reduction such as potential lower rates of VAT on more environmentally sustainable growing-media products."
The overall proportion of peat in horticultural growing products fell from 46 per cent in 2007 to 42 per cent in 2009, according to Defra report SP08020, Monitoring the Horticultural Use of Peat and Progress Towards Achievement of the UKBAP Target.
Some 69 per cent of peat was used by amateur gardeners. They used 53 per cent of alternatives. Professional growing media used 30 per cent of total peat. The amount used by professionals compared to other materials was 76 per cent. The results show that the UK horticultural market is now 58 per cent peat free.