This month has begun with the biggest single alcohol duty increases in almost 50 years in the UK, according to the country’s Wine & Spirit Trade Association (WSTA), which has campaigned to have the ‘crippling’ hikes scrapped.
Alongside duty rising with inflation, the WSTA said the launch of new rates as of 1 August have pushed up duty tax on a bottle of still wine by 20%, or £0.44, based on an average alcohol strength of 12.5% abv.
It’s part of a new duty tax system in the UK that is based around alcoholic strength (abv), first announced by prime minister Rishi Sunak during his time as chancellor.
Duty tax on a bottle of 12% abv sparkling wine will fall £0.19 under the new regime, and the government has also highlighted benefits for lower-strength drinks and pubs.
Yet there have been warnings from the trade about the impact on many still wine styles, and also fortified wines.
Steve Moody, executive chairman of distributor Fells, said last month, ‘The Government’s duty rises will have the biggest impact on fortified wines, including Sherry and Port, which will see duty rise by 44% (+VAT) adding around £1.50 to a bottle.’
It remains to be seen how far the new duty regime impacts consumers, but the WSTA has warned that significant hikes to duty in some cases may translate into higher prices.
Some businesses have indicated that they will try to absorb costs for now. The Wine Society retailer, which has a membership-based clientele, said in April that it intended to hold prices, and it reiterated this message on its website in the wake of duty changes.
‘Holding prices means that we are paying for both the cost of inflation and the biggest increase in duty for nearly 50 years,’ it said. ‘It is a big commitment.’
Industry leaders have succeeded in negotiating some breathing space for still wines.
Under the new system, still wines between 11.5% and 14.5% abv would be taxed at different levels, with incremental increases as the alcohol strength rises. However, this change won’t apply until 1 February 2025, with these wines taxed as if they are 12.5% abv in the interim.
John Colley, CEO of wine retailer Majestic, said, ‘Today’s hike in alcohol duty is incredibly poor timing, driving further inflation for retail customers and the thousands of pubs, bars and restaurants in the on-trade.’
He said, ‘We are working incredibly hard to minimise the impact for our customers, and our job at Majestic remains as it always has done: to source the best quality, unique wines at the best possible prices.’
The government has argued that its new regime helps to simplify the way duty tax works, but Colley joined others in the trade who have questioned the logic of new wine tax bands.
‘Wine alcohol content, as an example, is controlled by the weather. Implementing these variable duty bands based on abv adds a huge amount of complexity and cost on top of the actual tax increase, when Brexit was supposed to reduce both.’
Miles Beale, chief executive of the WSTA, said recently, ‘We are careering towards an extremely tough period for wine and spirit businesses with tax hikes and other costs, including a prolonged cost of living crisis for their consumers, persistently high inflation – especially for food and drink – and rocketing prices for glass, leaving little room for many businesses to turn a profit. Inevitably, some won’t be able to stay afloat.’
Wine and spirits businesses were looking to find ways to keep their products affordable, but there is no quick fix, the WSTA said.
