HARD-UP councils may have to foot the bill to get rid of a mountain of wastepaper rendered almost worthless as a result of the slump.

The company given the task of collecting paper from dedicated households across the region has been forced to store it in a warehouse after the market collapsed.

Greencycle, a London-based firm contracted by several authorities in County Durham, had hoped to find a willing buyer for the paper mountain in China.

But the worldwide slump has led to a dramatic fall in demand – leaving recycling bosses with no alternative but to stockpile unwanted waste.

In the last two months the price of paper has fallen by more than 80 per cent from a high of £70 per tonne to just £10.

Instead of being recycled, thousands of tonnes of waste paper collected from County Durham homes has been stored. Unless it can be sold on soon the paper will start to rot and will have to be disposed of in landfill.

Now Greencycle is said to be re-examining its council contracts in a bid to save £200,000 in the downturn.

Councils may be faced with the prospect of covering the costs – or watching as their recycling initiatives collapse.

The leader of Durham County Council said he believed the Government may have to step in.

Simon Henig, whose new unitary authority will take over the recycling contracts signed by Durham’s district authorities in April, said: “Clearly there are negotiations ongoing and it would be in no one’s interest to see recycling companies going bankrupt. We will be doing what we can to support them, as I expect will the districts.”

He said it would be unfair if local councils trying to meet Government recycling targets were punished because of a worldwide slump.

“We can hold out and wait for now, but if there is a big issue in a few months’ time, there will have to be a national policy set to ensure families still recycle while businesses are given the help they need to survive.”

Some local authorities in the region believe the price has already reached rock bottom and are pinning their hopes on a rapid recovery in the market.

Keith Parkinson, environmental health and licensing manager at Easington council, said: “This is just a temporary measure.”