Alcohol duty had been due to rise by 3% in August, but will now rest frozen until February 2025. While alcohol bodies had campaigned for a cut to alcohol duty, they have welcomed the freeze against the wider challenges facing the industry.
Wine and spirits concerned over wine easement end
The UK’s wine and spirit industry is ‘breathing a sign of relief’ following the announcement, says Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA) – particularly given the introduction of a new alcohol duty system just six months ago.
When the new alcohol duty system came into effect in August, wine was given an 18-month “easement” period to make the transition easier.
This means wine at 11.5-14.5% ABV is taxed at a single amount pegged to the rate for 12.5% ABV - covering approximately 80% of the wine on the UK market.
However, he points out that the freeze is only a reprieve and that wine and spirits business still have to steel themselves for complex rules: one of those being the end of wine easement.
“The benefits of a freeze will be short lived for wine businesses who are fuming after confirmation that costly and fiendishly complex new taxation rules will come into force from 1 February 2025," he said.
"The changes to taxing wine have been described as “un-administrable” and “sheer lunacy” by our members. Scrapping the easement for wine duty will see price increases for 75% of red wines sold in UK.
"The Chancellor and his Treasury colleagues should have listened to businesses and kept in place the sensible, simplified procedure for taxing wine. It’s going to be a very costly mistake.”
Ed Baker, managing director at wine and spirits supplier Kingsland Drinks, said: “The Chancellor’s decision to freeze alcohol duty is welcome, and it will help to ease one of inflationary pressures that penalise the drinks industry.
“While this step will ease pressure in the short term, we urge the government to tune into the reality facing all parts of the drinks industry and continue to listen.
“We also stand united with the WSTA in our frustration at the Chancellor’s decision to scrap the easement for wine duty, which will lead to costly red tape, added complexity and price uncertainty for consumers. We urge the government to see sense and listen to the industry on this critical matter.”
Steve Finlan, CEO of the Wine Society – the world’s oldest wine club and a leading UK wine merchant - said doubling down on the intention to introduce a ‘ludicrous and complex process’ for calculating duty rates will be hard on small businesses.
“It is hard to see how this new system could be made any more complicated. It is tough for a small company with a few hundred wines to sell. For The Wine Society with tens of thousands of wines stored in-bond, it is close to unworkable, yet another mountain of red tape and more costs for the consumer to bear.”
Quoting figures from the ONS, the WSTA points out the average prices measured in January 2024 represent the following increases on last year:
- The average price of a bottle of red wine is £7.85: up 8%
- The average price of a bottle of vodka is £17.04: up 9%
- The average price of a bottle of gin is £17.11: up 6%
- The average price of a bottle of fortified wine is £11.67: up 17%
The Scotch Whisky Association has also welcomed the alcohol duty freeze, pointing out that the industry is still faces the challenges of inflation.
Commenting on the Spring Budget, Chief Executive of the SWA Mark Kent said: “The industry welcomes the Chancellor’s recognition of the benefits of continuing the duty freezes beyond August this year. That decision supports the Scotch Whisky industry, will incentivise investment and, as with previous cuts and freezes, boost Treasury revenue. With cost pressures hurting our bars and pubs, not to mention hard pressed consumers, the Treasury has provided some much-needed certainty and stability for the year ahead.”
However he says that Scotch Whisky is at a disadvantage in the duty system: with Scotch and other spirits remaining the highest taxed alcohol category in the UK.
“Longer term action is still needed to address the high tax burden on Scotch Whisky, which is taxed at a higher rate per unit of alcohol than wine, beer and cider, and faces the highest spirits duty rate among G7 nations.”
Pubs have plenty of challenges despite alcohol duty freeze
The UK boasts some 38,000 pubs, alongside an important beer industry made up of both multinational and craft brewers.
Emma McClarkin, Chief Executive of the British Beer and Pub Association says the freeze on alcohol duty will be welcomed by brewers, pubs and consumers alike.
But she says the challenges faced by the industry remain considerable.
“Brewers and pubs still face a £450m cliff edge of spiralling wage costs and business rates increases, particularly those pubs that are larger or food-led. It is disappointing that the Chancellor did not choose to go further with a cut duty, reduce VAT or cap the increase to the business rates multiplier which would have helped mitigate the huge cost of doing business.
"Pressures on our sector remain acute with margins being squeezed to the point where we fear it is likely that a further 500-600 pubs are likely to close this year on top of the 530 that closed in 2023."
However, the industry hopes to benefit from the decision to cut National Insurance contributions for all workers by 2p in the pound, which could boost consumer spending.
SIBA - which represents the UK's small and independent brewers - says more could have been done to help beer and pubs.
“The Government’s continued support for independent breweries and community pubs through an extended beer duty freeze is a welcome announcement that will help keep the price of a pint from rising," said Andy Slee, SIBA Chief Executive. "The National Insurance cuts will also put more money into people’s pockets which is essential for encouraging spending in pubs and hospitality
"However nothing has been done to address the heavy Covid debt the sector still carries, and despite pubs and independent breweries being vital to local communities they have received no direct support in the Spring Budget – with a missed opportunity to increase the Draught Relief to 20% or more which could have boosted our hospitality sector.
"We are disappointed that nothing specific has been done to help alleviate the cost tsunami facing our much loved breweries and pubs in the months ahead.”
