The UK’s alcohol sector is still struggling to recover from the lingering effects of the pandemic, as well as changing consumer preferences.
Alcohol duty in the UK is set to increase in line with inflation from 1 February onwards, lifting the prices of spirits and wine in the process. A new duties system, which will rely on the strength and alcohol content of various drinks will also be implemented.
According to the Wine and Spirit Trade Association, taxes on a gin bottle will rise by £0.32 (€0.38). Similarly, taxes on wine, which have an alcohol by volume (ABV) of 14.5%, will climb by £0.54 (€0.65).
This could be a significant blow to the country’s pub and hospitality sector, which is still struggling to recover from the effects of the pandemic, as well as shifting consumer trends. This includes more drinking at home, versus going out to a pub, as well as greater demand for non-alcoholic or low-alcoholic drinks, amid healthier lifestyles focusing more on moderation.
For the wine and spirit sector, it doesn’t end there, as these companies will have to shell out for more taxes from April onwards. This will be in the form of new waste packaging recycling fees, which will be included in the Extended Producer Responsibility (EPR) policy.
These additional taxes are expected to add about £0.12 (€0.14) to wine bottles and £0.18 (€0.22) to spirit bottles, however final tax figures are likely to be revealed around July this year.
Several UK businesses have already shared that they will not be able to absorb the impact of both these tax rounds, and may have to pass on additional costs to consumers.
Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), said in a press release on the organisation’s website: “The Government continues to claim that the tax hikes are part of their big plan to plug the black hole in the public finances, but a series of record-breaking tax levies are doing the exact opposite.
“There are no winners under the UK’s punishing alcohol tax regime – higher duty rates mean people buy less which results in reduced income to the Exchequer, businesses are being squeezed and consumers have to pay more.
“The financial impact will be different for every business, but it is estimated that some of the major retailers will be facing millions of pounds in losses. This will have a knock-on effect on producers and distributors who will also find their profits plundered. The result is a bitter blow for British businesses, large and small.”
Hal Wilson, co-founder of Cambridge Wine Merchants, also said: “The government has failed to acknowledge that there are fundamental differences between wine and other, more manufactured, alcoholic drinks where final alcoholic strength can be predetermined.
“In my business this feels like death by a thousand cuts, or even two thousand cuts. We sell over 2000 different wines each year and from February will need to know the precise ABV of each and every one before being able to calculate their full cost. For each 0.1% ABV difference there is a different amount of tax to be paid. Our range of wines has 48 different ABVs between 8.5% and 22%. This herculean bureaucratic exercise would not be necessary to carry out if the rates of tax weren’t so eye wateringly high.”
UK’s higher draught relief could be a win for beer drinkers
The UK’s increase in draught relief, which was first announced in last year’s Autumn Budget, as well as higher small producer relief (SPR), will also go into effect from 1 February. Both these measures are worth approximately £85m (€101.67m) together.
For draught relief, this will be a 1.7% tax decrease in cash terms on the production of draught alcohol, for draught products with an ABV below 8.5%. On an average 4.58% pint, this will mean a reduction of tax by £0.01 (€0.0119).
Small producer relief will apply to products with an ABV of below 8.5% and helps small producers of alcoholic goods to pay lower taxes.
James Murray, the Exchequer Secretary to the Treasury, said in a press release on the UK government’s website: “Our pubs and brewers are an essential part of the fabric of the UK and our brilliant high streets.
“Through draught relief, small producer relief, and expanding market access for smaller brewers, we will help boost sector growth and deliver our Plan for Change to put more money in working people’s pockets.”
Richard Naisby, the chair of the Society of Independent Brewers and Associates (SIBA), also said: “The Government’s increased investment in Draught Relief means that draught beer sold in our community pubs has a lower rate of alcohol duty than beer sold in supermarkets. At the same time by going further on Small Producer Relief, the Government can help small breweries to compete and grow their businesses.
“While these support schemes have kick started innovation and enabled small breweries to set up, many breweries struggle to get access to the vital pubs market so they can expand. The Government’s review will examine ways to address these access issues and ensure that landlords can access the beers their customers want and small breweries can grow.”
