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UK budget 2011 ‘unhelpful’ say wine merchants

The UK wine industry is more resigned than angry as the Budget confirms the price of wine will rise by around £0.15 a bottle.

Many said they would not lose customers, but any sort of tax hike in the current climate was unhelpful.

Chancellor George Osborne
(pictured) announced today he will stick with the duty ‘escalator’ introduced by the last Labour government, under which alcohol duties are set to increase 2% above inflation until 2015.

With inflation at more than 5%, consumers will see tax increases of around 7.2%, equating to £0.15 more for a 75cl bottle of wine, £0.54 more for a 70cl bottle of spirits and £0.04 on a pint of beer.

The tax increase comes into effect from midnight on Sunday.

Some wine retailers perceive the escalator as a complex and ‘underhand’ manoevre on the part of the government.

Patrick Sandeman at merchants Lea and Sandeman, a four-store London chain, said ‘I’m still unclear as to what the tax rise will be – the escalator is rather an underhand way of slipping a tax rise in.’

Sandeman said the rise would mean ‘inexpensive wine will go up’ and it will become more and more difficult to find decent wines at under £10.

He said he would not absorb the costs: prices would go up, but this would not mean he would lose customers. ‘People tend to buy in price brackets – if your bracket is £5.95 to £7.95, another 20p will not make much difference.’

At Philglas and Swiggott, a three-branch chain in London, the rise was ‘not helpful but it won’t poleaxe us’, owner Mike Rogers said.

With an average price of £17 a bottle, customers might buy two bottles instead of three, but they would not desert, he said.

Other retailers say a rise of 13p on wine will mean they can’t put prices up but will have to absorb the cost and lose margin.

Laki Christoforou, owner of Wine Rack, was also unclear, as Mr Osborne’s budget speech ended, what the tax rise would be, but said if it was £0.13, ‘we will end up swallowing it. If a wine is at a crucial price point, say £9.99, we can’t go over that to £10.12.

‘A rise of 13p on a bottle means about £50,000 to us. To change our catalogues and publicity and to get staff to change prices on shelves would add up to a lot more than that.’

Wine and Spirit Trade Association chief executive Jeremy Beadles said escalating prices put further pressure on families, and damaged the chance for growth in the drinks sector.

‘With close to two million jobs supported by the sector, the Chancellor has missed an opportunity to help it play its part in the UK’s all-important economic recovery.’

Written by Adam Lechmere

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