Drinks firms ‘have no choice’ but to increase prices, say industry bosses
Top drinks businesses “have no choice” but to increase prices after facing steep cost hikes from rising alcohol duty, industry leaders have warned.
In November’s autumn budget, Chancellor Rachel Reeves confirmed that alcohol duty would increase in line with Retail Prices Index (RPI) inflation.
It means that the tax charged on alcoholic drinks will increase by 3.66% from Sunday February 1.
Miles Beale, chief executive of the WSTA, said: “Despite the OBR (Office for Budget Responsibility) at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is benefiting no-one.
“For the nation’s wine and spirit sector the complexities of price changes, especially for wine which is now taxed by strength, mean more red tape headaches ahead.
“Add to this all the other costs – including NI (national insurance) contributions, business rates and waste packaging taxes – and businesses have no choice but to increase prices in order to keep afloat, which unfortunately means consumers are going to take the hit once again.”
Duty hike risks ‘spirits discrimination’
Official data showed that the changes would see the duty on a typical bottle of gin, with 37.5% alcohol by volume (ABV), increase by 38p to £8.98, after VAT.
A bottle of Scotch whisky at 40% ABV would see its duty increase by 39p to £9.51.
Meanwhile, a bottle of 14.5% red wine will see its duty increase by 14p.
The Wine and Spirit Trade Association (WSTA) said the tax on a bottle of 14.5% red wine has gone up £1.10 a bottle since the recent alcohol duty regime was introduced in August 2023.
The UK Spirits Alliance, which represents hundreds of distillers across the UK, has written to the Chancellor urging her to use an upcoming duty review to drive growth, end “spirits discrimination” and put in place a long-term approach.
Alcohol duties are partly linked to the strength of drinks, with beer below 3.5% ABV paying a significantly lower level of tax following an overhaul of duties in 2023.
A number of beer brands, such as Foster’s, have reduced their strength to 3.4% in recent months in a bid to reduce their duty costs.
Braden Saunders, UK Spirits Alliance spokesperson and co-founder of Doghouse Distillery, Battersea, said: “The timing couldn’t be more ironic.
“Just as dry January draws to a close and people contemplate their first hard-earned drink, they’re met with higher prices at the bar.
“The spirits industry has been treated as a cash cow by consecutive governments, and the sector is on its knees.”
Pubs and bars are closing at the fastest rate seen this century, Morning Wire analysis found, as rising costs squeeze many in the hospitality sector to the point of collapse.
The number of British pubs and bar businesses appointing liquidators or administrators surged to 449 in the first 10 months of the year, the most in more than two decades, according to figures compiled using insolvency disclosures.
That represents a rise of five per cent compared to the same period last year, and a more than tripling compared to 2015, as hospitality firms wrestle with the fallout from the Covid lockdowns, last year’s tax rises and rising employment costs, plus weak consumer confidence.