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Alcohol Duty Review
| 20 November, 2023
Wine and spirit businesses are calling on the Chancellor to freeze alcohol duty at the Autumn Statement after latest data shows a worrying decline in sales.
The Wine and Spirit Trade Association has been shown unpublished off trade sales figures which show a drop of around 20% in spirit sales in the last 28 days and a double digit drop for wine during the same period.
The unusually steep downturn in wine and spirits bought in UK supermarkets and shops follows the largest alcohol duty increase in almost 50 years imposed by Jeremy Hunt on August 1. UK firms are extremely concerned that a second duty increase at the Autumn Statement will threaten the survival of some businesses.
Despite an overall drop in inflation wine and spirits have seen nearly a triple digit increase in the last three months.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:
“We have long argued that duty rises are counterproductive and lead to reduced sales which means less revenue to the Exchequer. The most up-to-date sales shows starkly shows that consumers are still in the grip of a cost of living-of-living crisis and cannot afford to keep stretching their budgets just to be able to enjoy some of life’s little luxuries.
We are asking the Chancellor to stop, think and freeze alcohol duty. In August the Treasury introduced the largest alcohol tax hike for almost 50 years adding over 10% duty increase for spirits and over 20% increase for 4 out of every 5 wines of all wine sold in the UK. A further rise is damaging to British businesses, will pile on more misery for consumers resulting in less cash for the Exchequer.”
Steve Finlan, Chief Executive of the Wine Society, said:
“What we know is purchasing is down, prices are up and on top of the shambles of aborted deposit and return and failing PRN glass recycling schemes it feels like an assault on the industry for no net gain. Jeremy Hunt said this was a budget for growth, instead his actions will cause misery for consumers, wine retailers and wine producers and threaten the survival of many businesses at a time when consumer confidence is slowly returning. One tax rise in a year is alarming, two is unacceptable. We ask the Government to reconsider.”
Simon Doyle, General Manager of Concha y Toro Europe, said:
“Alcohol duty increases are a tax on the consumer. We’ve seen very high levels of inflation this year, and in wine prices most of that inflation is being driven by the recent duty increase.
Excise duty is a fixed cost that is also subject to VAT, so it disproportionately affects shoppers at the lower end of the market. Wine has been an affordable luxury for many – but those couple of glasses at the end of a working week will become even more expensive. 61% of a bottle of wine bought at £6 already goes to the government in tax (excise £2.67, plus £1 of vat). A further increase will likely mean over two thirds of a bottle bought at £6 will be made up of tax in one form or another.”
Kathy Caton, Managing Director of Brighton Gin, said:
“The rise of small-scale craft distilleries has been an amazing growth area over recent years, but is now at risk of serious crisis and decline. Many craft distillers don’t have the financial reserves to cope with the toxic combination of much higher costs, and declining sales while consumers deal with navigating the ongoing cost of living crisis. The August duty hike has had a very clear and damaging effect on sales. There have already been some very high-profile closures of distilleries within our sector and anecdotally I know of many others who are considering shutting operations – if distilleries go bust, they won’t be contributing anything at all through taxes and duty. I would call on the Chancellor to support and not suffocate what has been a British business success story but is now in danger of a serious contraction.”
If Jeremy Hunt chooses to increase duty by RPI, currently 8.9%, when added to the increases on 1 August this would result in cumulative excise duty increases of 68p on a bottle of wine, £1.50 on a bottle of spirits and £1.67 on a bottle of port.
The budget busting duty hike would mean the Chancellor has announced a 30% increase in wine duty and 20% increase in spirit duty, in the space of six months.
According to ONS data for average prices on items in your shopping basket in September 2023:
These average bottle prices do not however include the full impact of the August duty rises – as not all the stock sold in August and September would have included the new duty rates.
If consumers were expected to pay for a second duty rise this year the average price of a bottle of red wine is expected to go over £8 for the first time. And the average price of a bottle of gin or vodka is expected to exceed £18 for the first time.
The WSTA has written to the Chancellor to highlight his unfair approach to taxing alcohol, which has seen wine and spirits treated more harshly by successive Conservatives Chancellors since 2010:
Beer duty has gone up 21%
Spirits duty has gone up 32%
Still wine duty has gone up 58%
And duty on a bottle of 20%abv Port by 90%
The new alcohol duty regime which came in on August 1 means all alcohol is taxed by strength for the first time. And underlying rates have risen. This comes on top of dramatically increased supply chain costs. The cost of wine and spirits has continued to rise in recent years due to the enormous increase in the recycling fees that glass manufacturers must pay.