Bosses in the wine and spirits sector have issued a strong caution that companies must raise prices to survive as alcohol duty hikes come into effect. Chancellor Rachel Reeves announced a rise in alcohol duty aligned with Retail Prices Index (RPI) inflation during November’s autumn budget. Starting February 1st, the tax on alcoholic drinks will increase by 3.66%.
Although the duty is levied on alcohol producers, industry leaders warn that consumers will bear the brunt through a trickle-down effect after facing escalating costs over recent years.
Recent government data revealed that a standard bottle of gin at 37.5% alcohol by volume (ABV) will see duty climb by 38p to £8.98 post-VAT. Similarly, duty for a bottle of Scotch whisky at 40% ABV will rise by 39p to £9.51, and a 14.5% red wine bottle will face a 14p duty hike.
The Wine and Spirit Trade Association (WSTA) highlighted that duty on a 14.5% red wine bottle has surged by £1.10 since the current alcohol duty framework was implemented back in August 2023.
The UK Spirits Alliance, representing numerous distillers nationwide, has urged the Chancellor to use the upcoming duty review to drive growth, eliminate “spirits discrimination,” and establish a sustainable long-term plan. Alcohol duties are influenced by beverage strength, with beers under 3.5% ABV attracting significantly lower taxes following a duty revamp in 2023.
Several beer brands, like Foster’s, have recently reduced their alcohol content to 3.4% in a bid to lower duty expenses. Beer taxes will increase for sales in both pubs and supermarkets, marking the first time pubs have been impacted since 2017.
Emma McClarkin, the chief executive of the British Beer and Pub Association, expressed concerns about potential price rises, adding pressure to already thin profit margins for brewers.
Miles Beale, the WSTA chief executive, criticized the government’s stance on alcohol duty, highlighting the complexities of price changes, especially for wine taxed by strength, leading to more challenges for the sector.
Braden Saunders, a UK Spirits Alliance spokesperson and Doghouse Distillery co-founder in Battersea, expressed dismay at the timing of the price hikes, citing the strains on the spirits industry.
Allen Simpson, UKHospitality chief executive, voiced worries about the growing cost burden on hospitality businesses due to the alcohol duty increases potentially being passed on through higher drink prices.
A Treasury spokesman defended the duty increase, emphasizing the government’s efforts to alleviate cost-of-living pressures through various measures, including freezes on fuel duty, rail fares, and prescription fees, while also emphasizing the importance of alcohol duty in supporting public services.