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British SME’s call for duty and on-trade VAT cut to support Covid-19 recovery

Budget | 22 January, 2021

Britain’s best loved wine and spirit SMEs have joined forces to urge Rishi Sunak to cut wine and spirit duty and extend hospitality’s VAT cut to alcoholic drinks to help boost British business.

Concerned owners of small and medium-sized wine and spirit businesses have jointly penned a letter to the Chancellor asking the government for more support for SMEs as businesses fight to stay afloat in the grip of the Covid pandemic.

Much of the UK wine and spirit sector have seen their businesses take a major hit as the hospitality sector were forced to close their doors and shoppers deserted the high street.

The suppliers of the hospitality trade have not been eligible to benefit from the loans and support packages offered by Government to pubs, bars and restaurants.

That is why the WSTA and its members have decided to write an open letter to the Chancellor asking for a vital lifeline in the shape of a cut to alcohol duty on wines and spirits; and to extend the VAT hospitality cut – until at least March 2022 – broadening the scheme to include all sales of alcoholic drinks.

In the letter signed by 26 WSTA members typical of the sector’s SMEs – which make up the majority of the UK’s wine and spirit businesses – they highlight how their businesses face significant pressures, especially if Government decides to raise taxes.

For many SME businesses, the on-trade represents the ‘shop window’ for their products.

With repeated closures of venues, until at least March 2021, this shop window has been shuttered and many small businesses are suffering disproportionately. In the off-trade, too, prices are set to rise for many wine retailers as the additional costs of new trading arrangements with the EU begin to bite, which will have to be passed on to consumers.

The WSTA’s letter warns the Chancellor that a rise to the UK’s already significant tax burden is damaging enterprise.

Britain’s expert wine producers, spirit makers and specialist wine and spirit retailers want to understand why the Government insists on taxing what we do best most heavily.

Miles Beale, Chief Executive of the Wine and Spirit Trade Association said:

“This Budget comes at a crucial time for British wine and spirit SMEs who have had to baton down the hatches once again as the country sits out a third lockdown without any confidence in knowing when it might end.

“The new and developing trading landscape since 1 January has also put pressure on small and medium size businesses who are picking up the tab for additional import costs and red tape.

“SMEs have worked hard, despite drastic dips to their income, to support communities through efforts like making hand sanitiser and free local deliveries. Britain has some of the world’s highest alcohol tax rates, and it is extremely unfair to pass on more pain to cash strapped consumers and to SMEs fighting to keep their businesses afloat.

“We are asking for the Chancellor’s proactive support to help SMEs – which are the backbone of a successful British industry – to build back better.”

Tamara Roberts, CEO of Ridgeview Wine Estate, said:

“We are a second-generation family business and through hard work from our exceptionally talented and dedicated team we are now recognised all over the world for our award winning English sparkling wine. We would like to see more government support for businesses like ours who want to continue to grow and fly the flag for English wine on the global stage.

“A duty cut at the Budget would give SMEs like ours some breathing space in order to recover following the closure of the hospitality sector. The UK’s duty rates are ridiculously high compared to France. We’d like to see similar support from our government through low duty to help nurture the ambitious UK wine industry.”

Mark Gamble, Managing Director Union Distillers Ltd, said:

“The hospitality business has been hit extremely hard by the pandemic and some businesses will not recover. Every help is needed to get those that survive to bounce back quickly. A reduction in Duty will increase margins for the industry, helping to recovering COVID losses and ensuring full employment of staff.”

The UK is the world’s largest spirit exporter and a great British success story. In 2019 Britain recorded over 440 distilleries, an increase of 22% on 2018 and more than double the number of distilleries recorded in 2014.

Britain has an ambitious and rapidly growing wine industry with over 770 vineyards in the UK and 165 wineries. The UK’s wine makers are keen to keep growing in terms of both domestic sales and exports. Following the heatwave in 2018 the equivalent of over 13 million bottles of wine were produced in the UK, double the previous record harvest. The following year in 2019 around 550,000 bottles of English wine were exported to markets across the globe.

Duty is currently so high that 55% of the average priced bottle of wine and 73% of a bottle of spirits, at 40% abv, sold in shops and supermarkets is now taken by the Treasury in tax and VAT.

The UK alcohol industry is one of the most heavily taxed in Europe, as we are stung by the third highest duty rates for wine and fourth highest duty rate for spirits when compared with EU countries.

A cut would save UK wine and spirit businesses – which support over 360,000 jobs – thousands of pounds, which can help businesses to survive in the short term; and to invest, grow, export and create even more jobs in the medium term.

The full list of signatories:

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