The alcohol industry in the UK continues to navigate challenges stemming from the pandemic’s aftermath and evolving consumer habits.
Starting from 1 February, alcohol duty in the UK will rise in alignment with inflation, inevitably increasing the costs of spirits and wine. A new taxation framework based on the alcohol strength and content for various beverages will also be put into effect.
As highlighted by the Wine and Spirit Trade Association , taxes on a bottle of gin will see an increase of £0.32 (€0.38), while wines boasting an alcohol by volume (ABV) of 14.5% will experience a £0.54 (€0.65) rise in tax.
This hike in taxes could pose a serious threat to the UK’s pub and hospitality sector, which is still struggling to regain stability post-pandemic, alongside a shift toward home consumption and an increasing preference for non-alcoholic or low-alcohol beverages inspired by healthier lifestyles.
Furthermore, the wine and spirit sector will face additional taxes starting in April, in the form of new waste packaging recycling fees under the Extended Producer Responsibility (EPR) policy. It is estimated that these added costs will result in an increase of around £0.12 (€0.14) for wine bottles and £0.18 (€0.22) for spirits, although concrete figures are expected to be disclosed in July.
Many UK businesses have already indicated that they cannot absorb the financial burden of these tax increases and might need to pass these additional costs onto consumers.
Miles Beale, CEO of the Wine and Spirit Trade Association (WSTA), noted in a press release : “While the Government purports these tax hikes as a means of addressing public financial deficits, these record tax rates have the opposite effect.”
“Under the UK’s harsh alcohol tax system, there are no benefits – increased duty rates deter purchases, leading to diminished revenue for the Exchequer, squeezing businesses, and compelling consumers to pay more.”
According to Beale, the financial repercussions will vary across businesses, with some major retailers projected to confront millions in losses. This downturn will inevitably ripple through the supply chain, affecting producers and distributors and delivering a severe blow to British enterprises, whether large or small.
Hal Wilson, co-founder of Cambridge Wine Merchants, expressed concern, stating: “The government has overlooked the distinctions between wine and other, more processed alcoholic beverages where alcohol levels can be predetermined. In my experience, it feels like a death by a thousand paper cuts, or perhaps even two thousand. We offer over 2000 different wines each year and will need precise ABV calculations for each, as a difference of 0.1% ABV alters tax rates significantly. This bureaucratic burden draws focus from our core business operations.”
Boosting Beer Drinkers: UK’s Higher Draught Relief
On a more positive note, the UK is set to implement an increase in draught relief starting 1 February, a move initially announced in last year’s Autumn Budget, along with higher small producer relief (SPR). Together, these measures are valued at approximately £85m (€101.67m).
For draught relief, which applies to products with an ABV under 8.5%, this will result in a 1.7% reduction in the tax burden, translating to a £0.01 (€0.0119) decrease on an average pint with 4.58% ABV.
Small producer relief, aimed at products with an ABV below 8.5%, offers a tax reduction that benefits small-scale producers, enabling them to thrive in a competitive market.
James Murray, Exchequer Secretary to the Treasury, conveyed in a government press release : “Our pubs and brewers form a vital part of the UK’s cultural landscape and vibrant high streets.”
“By expanding draught relief, small producer relief, and enhancing market access for smaller brewers, we aim to foster growth within the sector and enact our Plan for Change to benefit working individuals.”
Richard Naisby, chair of the Society of Independent Brewers and Associates (SIBA), added: “With the Government’s increased investment in Draught Relief, it’s now more affordable to purchase draught beer at our community pubs compared to supermarkets. Furthermore, by enhancing Small Producer Relief, the Government supports small breweries, assisting them in growing and competing.”
“Though these initiatives have sparked innovation and facilitated the establishment of small breweries, many still struggle to access the vital pubs market necessary for their expansion. The Government’s ongoing review seeks to address these barriers, ensuring landlords have access to a variety of beer options their customers demand and providing opportunities for small breweries to flourish.”
Photo credit & article inspired by: Euronews
