Budget blow will mean price hikes for wine

Budget | 23 October, 2018

Gin makers across the country have joined forces to call on the Chancellor to freeze spirit duty and show he is backing British business.

The Wine and Spirit Trade Association teamed up with 24 of the UK’s top distillers to write to Philip Hammond, raising serious concerns over a planned increase to spirits duty at the Budget this month.

The message to Hammond is to honour the comments made by Theresa May at Conference when she said the Conservatives were “a party that believes in business”.

British Gin makers could take a hit of over £16 million extra in duties on last year if Philip Hammond puts the boot into booze at the Budget and raises duty again.

The planned 3.4% duty rise would add another 26p on a bottle of spirits. 75% of an average priced bottle of spirits goes straight to the taxman, with £8.05 for every 70cl bottle of gin at 40% abv going on duty.

Entrepreneurial spirit makers are warning that the tax burden will stifle the growth of innovative, creative start-ups who have helped drive the gin renaissance and allowed British gin to break records both home and abroad.

The latest WSTA market report showed gin broke the £2 billion mark with sales doubling in value in the last five years.

Brits bought almost 60 million bottles of gin in 12 months, worth over £1.6 billion which when you add it to over £530 million worth of British gin exports breaks £2 billion for the first time.

The Wine and Spirit Trade Association is warning consumers to brace themselves for wine price rises as businesses take a huge inflationary hit following the Budget announcement.

Following Brexit’s impact on the pound combined with inflation the wine trade is already facing a tough trading landscape.

As a result of the 3.1% inflationary rises on alcohol imposed by the Philip Hammond, wine businesses and consumers will bear the brunt of the tax hike a month before Brexit.

The duty rises by inflation will mean a bottle of wine will go up by 7p, sparkling wine 9p and an average priced bottle of fortified wine will also go up 9p. This does not include VAT which would add a further 20% to the wine duty rise.

Based on volumes of wine sales over the last 12 months, from February next year UK consumers of wine and sparkling wine will be hit with an extra £90 million bill.

An average priced bottle of spirits will remain the same following a welcome freeze to spirit duty.

Hammond has made himself an unpopular Chancellor with the wine trade and wine drinkers after singling them out for a rise and freezing duty to all other alcohol products. The Chancellor also put up wine duty in the Spring Budget last year.

Commenting on the Chancellor’s decision to freeze duty on spirits and raise wine duty by inflation, Miles Beale Chief Executive of the Wine & Spirit Trade Association said:

“We welcome the Government’s decision to freeze duty on spirits, which will support this great British sector to invest, grow and create jobs – as well as supporting the public finances through increased revenues.

However, the decision by the Chancellor to increase wine rates significantly is a hammer blow to this great British industry. It actively undermines a sector that has been hardest hit since the Brexit Referendum and will be thoroughly unwelcome for the 33 million consumers of the nation’s most popular alcoholic drink.

This inflationary rise is grossly unfair, unjustified and counter-productive. The UK is the world’s biggest wine trading nation and, as such, deserves government’s support, not punishment.

The wine industry is, unfortunately, no stranger to harsh treatment from Chancellors. Since 2012 wine overtook beer as the largest contributor to the public purse through duty payments, and no alcoholic drink has paid more to the Treasury since then. Today’s announcement means that only twice since 2003 that Chancellors from either party have showed their support to an industry employing some 190,000 people across the country.

By increasing the UK’s already excessive duty rates the Chancellor will clobber wine importing businesses, including thousands of SMEs; stifle growth of our flourishing English wine industry and; raise prices for consumers.”

The failure to rebalance this unfair tax burden on the wine industry will stifle business’s ability to invest and grow and damage the sector which last year brought in almost £19 billion in economic activity.

The increase goes against recent Budget success stories. After a freeze in wine duty in the November Budget last year, between February to August 2018, wine duty income increased by £39 million up 2% on the same time last year.

Miles Beale added:

“The freeze in duty on spirits announced today will be hugely welcomed by the hundreds of producers across the UK, and over 280,000 people employed across the spirits sector. Gin exports are now worth over £532 million, and the freeze announced today will give UK spirit producers the confidence to continue to expand their export markets and seek to take advantage of future trading opportunities.

However, this Budget represents a missed opportunity. It ignores the evidence from the last Budget that Treasury coffers actually increase following a freeze in wine duty. The inflationary rise in wine duty suggests the Chancellor has closed himself off to the concerns of our world leading industry and is wildly out of touch with British consumers.

Moreover, today’s announcement puts us further out of step with excise duty rates internationally. It won’t please those wine-producing nations who want to agree FTAs with the UK either. It forces British businesses to compete on an ever more uneven playing field, which is grossly unhelpful particularly when final preparations are being made to leave the EU – potentially without a deal.”

The revised rates are due to come into effect after midnight on Friday, February 1st.

Following the Chancellor’s announcement that duty on wine, sparkling wine and fortified wine will rise by RPI from 1 February 2019, the Treasury has now confirmed that RPI is forecast to be 3.1% next year. Duty on spirits, beer and most ciders will be frozen at current rates.

This will mean:

Duty on a 750 ml bottle of wine will go up 7p to £2.23

Duty on 750 ml bottle of sparkling wine will go up 9p to £2.86

Duty on a 750ml bottle of fortified wine will go up 9p to £2.98

These numbers do not include VAT which will add a further 20% to these increases.

Duty on a 700ml bottle of vodka at 37.5 % will remain at £7.54

Duty on a litre bottle of vodka at 37.5 % will remain at £10.78

Duty on a 700 ml bottle of gin at 40% % will remain at £8.05

Duty on a litre bottle of vodka at 40% will remain at £11.50