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Alcohol Duty Review
| 16 December, 2022
The Chancellor has left Port and Sherry businesses wondering if this is their last Christmas with record tax rises set to hit in 2023.
Producers and importers of these historic wines have been left in the dark over the extent of the tax rises after the Treasury announced at the Autumn Budget it had “yet to make an uprating decision”.
As it stands the Government’s policy is to raise duty by RPI on February 1, which would result in alcoholic drinks seeing double-digit tax rises. But for fortified wines 2023 looks extra gloomy after officials have singled them out for the harshest tax hikes and will see duty go up by a £1 per bottle or more.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:
“If you like a glass of Port or Sherry at Christmas, we suggest you make the most of it this year it might be priced out of your Christmas shop thanks to the Government’s punishing tax proposals in 2023.
Port and Sherry producers and importers are incredibly concerned over the proposed tax changes which could see some SMEs go out of business.”
Unlike wines between 11.5% and 14.5% abv, which have been granted an 18 month stay of execution before having to tax their products by strength, fortified wines have no grace period and could be facing double whammy duty pain in 2023.
This is despite, according to the WSTA’s latest market report, fortified wines being the only alcohol category (except for cider) that had lower volume sales than pre-pandemic sales in 2019.
Still wines, sparkling and fortified wines – although reported gains compared to a year ago – still remain much lower than pre COVID volume sales three year ago. This suggests a slow recovery for these categories (still wine -26%, sparkling wines -23% and fortified wines down by -29%)
If the Chancellor, Jeremy Hunt, decides to increase duty by 10% (although RPI was 14% in November), duty on a bottle of Port would immediately go up by 29p on February 1, 2023.
Assuming the same inflationary increase is applied to the proposed rates in the new duty regime, when that duty system kicks in on August 1, duty on a bottle of 20% abv Port would increase again by a further £1.00.
In total by next Christmas duty for a bottle of 20% ABV Port will have shot up by £1.29 per bottle – a 43% increase*. That’s as large a percentage increase in duty as we have seen between December 2008 to December 2022.
Another festive favourite which is set to see prices soar is Sherry. On August 1, duty hikes will see a bottle of 15% abv Fino Sherry leap up by 97p (+43%) based on an estimated 10% RPI duty rise.
Such a jump in tax increases could put some SME out of business leaving is this the end of Britain’s long love affair with Sherry and Port.
The total UK market for fortified wine is £311m, of which Port sales represent £82m.
Producers are completely at a loss as to why politicians are targeting the fortified wine sector which is steeped in British history and was specifically created in to suit the British palate.
The Anglo-Portuguese Alliance is the oldest diplomatic alliance in the world still in force. The British started drinking Port and Sherry back in the 17Th century after tariff war with France put up the price of French wine. This led to the Methuen treaty of 1703 which granted Portugal preferential taxes on wine exports in exchange for lower duty on English textiles.
Melissa Draycott from Gonzalez Byass said:
“It feels like two hundred years of history and tradition between the UK and Spain are being poured down the drain in a misguided attempt to raise revenues for the Exchequer. Sherry is a much-loved drink here and enjoyed in moderation, so we are perplexed why our consumers should be hit so hard with this new tax model. Our sales are boosted by a duty freeze benefiting UK based businesses like ours which in turn boost the Treasury funds from duty tax as well as the jobs and tax our company provides in the UK.”
Steve Moody, Executive Chairman of Fells, the largest distributor of port in the UK said:
“These increases could reduce UK port sales by as much as 15%, especially if introduced all at once. Worse than that, they will cause lasting damage to the industry as a whole. Port production is not a factory process that can easily adjust to price hikes – it depends on many thousands of small independent growers who need stability and reliability in their consumer markets.
A shock price hike like this will drive a coach and horses through these fragile supply chains. At the very least, port and other fortified wines should receive the same easement period the Chancellor has given to other wines that are made from fresh grapes.”