Wine & Spirit All Party Parliamentary Group Call for Evidence: Support for Small and Medium-Sized Enterprises (SMEs)

The Wine and Spirit All Party Parliamentary Group (WSAPPG) is pleased to announce a call for evidence looking into how Government can support wine and spirit SMEs to recover, grow and export.  The inquiry will be facilitated by the WSAPPG secretariat, the Wine & Spirit Trade Association. 

The WSAPPG inquiry will consider the economic significance of the wide range of SME businesses that fall within the umbrella of the UK wine and spirit sector and the issues that they face. It is an excellent opportunity to showcase excellence but also to highlight areas of Government policy that might be hindering business growth and seek cross-party support for change.   

The inquiry will take written and oral evidence from any stakeholders with an interest or experience in the wine and spirit industry or trade facilitation who can offer a constructive contribution to the inquiry. A report will be produced, by the WSAPPG, based on evidence and made publicly available, including recommendations to Government. 

Terms of reference 

Please read this Terms of Reference (TOR) before submitting your evidence. Submissions that do not meet the criteria outlined in the TOR will not be considered. 

Guidelines 

Impact of Brexit 

Unlike wine where the UK and EU have established a positive tariff, there is zero tariff for most imports of spirit drinks into the UK and export of spirit drinks to the EU.  And unlike wine too, there is no spirit-specific import certificate required by either the UK or EU.  As such the impact of the UK/EU Trade and Cooperation Agreement was probably felt less by spirit producers than wine producers or wine importers.  Nonetheless the TCA may well have removed tariffs on a number of ingredients used in spirit production and also machinery and bottling equipment used during production.     

The most significant issue has been the movement of goods.  Since 1 January there have been some delays in moving spirits to and from the EU and UK although producers have reported a number of different reasons for the delays – no one common thread has emerged although the most commonly reported issue is freight companies being reluctant to take mixed consignments (known as groupage) because of the increase in paperwork.   In the short term there is not much that can be done, the increase in paperwork is a consequence of leaving the EU Customs Union, although the introduction of the new customs software (CDS) won’t have helped.  Longer term the Government’s plans to modernise the customs processes – Border 25 – should make life easier moving goods into the UK although it will be important to keep the timetable.  

Moving goods into Northern Ireland remains a significant issue.  The NI Protocol requires goods sold in NI to have an NI or EU-27 food business operator identified on the label but UK Excise rules require an excise duty stamp as proof of payment of excise duty.  This means that producers either have to produce specific labels for NI or have to over-sticker which is costly and bureaucratic.  The solution?  Get rid of excise stamps for spirits (no other category of alcoholic drink requires proof of payment of excise duty).   

Possible Questions 

 

Impact of COVID 

Like most other sectors, the impact of COVID and Brexit has created an (im)perfect storm for the wine and spirit trade.  The closure of the hospitality sector has hit small producers hard as many of them rely on the on-trade to showcase their products.  Unlike the hospitality sector though, those that supply into the sector have not been able to access the same degree of Government support e.g., suppliers were not able to claim business rate relief or have access to a number of grant schemes.   

Generally speaking wine and spirit sales on the off-trade have held their own over the last 12 months and many have experienced growth although not enough to offset losses from the on-trade shut down.   

Possible Questions 

 

Excise Duty and Review of Alcohol Excise Duty 

Excise Duty, both the high rate for spirits (spirts pay £28.74 duty per litre of pure alcohol while beer pays only £19.08 per litre of pure alcohol) and the complexity of the system which includes a requirement for spirits only to include an excise duty stamp on the bottle as proof of payment of UK duty.  Not only is the duty stamp costly to label, it reduces flexibility to divert products to other non UK markets. 

The Government’s review of Excise Duty, launched last autumn, should provide the vehicle to right some of the inequalities in the system but there is a widespread fear among the wine and spirit trade that because of COVID, beer will continue to receive favourable treatment as do anything else would be politically unattractive. 

As well as attracting a lower duty rate than spirits, beer producers receive reduced rates of duty for the first 500,000 litres of production – ‘small brewers relief’.  500,000 litres at 4% abv is the equivalent of over 71,000 bottles of spirts at 40% – a significant output for a slam distiller.  And while the Government is currently considering reducing the threshold to attract small brewer relief, even the proposed threshold equates to reduced support for 30,000 bottles of spirits at 40%.  Spirit producers (and wine producers too) understandably feel this targeted relied to wards the brewing industry further distorts competition between categories and this is something that needs to be addressed in the review of excise duty.  But rather than focus solely on duty rates, the Government should take a broader look at the most appropriate mechanism/s to support SMEs and excise duty relief should be assessed in that context. 

Possible Questions 

 

Red Tape and Economic Recovery  

The Government has announced a review of red tape – the APPG provides the perfect opportunity to hear from SMEs about the impact of bureaucratic burden on their businesses and their suggestions for improvement. 

Possible Questions 

 

Business Support 

Business support needs to be far more tailored to individual sectors – one size doesn’t fit all. The last Budget introduced welcome support for IT investment but for many in the drinks sector it is not the costs of IT but the costs of production equipment – stills, bottling facilities, etc that can stifle growth.  

 Possible questions 

 

Increasing Tourism 

Over recent years there has been a huge growth in distillery numbers in England over recent years – England now has more distilleries than Scotland. Many businesses will look to attract visitors to their production sites. 

Possible questions

 

Exports 

For many SME producers, having established themselves in the domestic market, the next step towards growing the business is to export for many target markets include USA and the far east particularly Japan, Singapore, and China.  The UK Government is keen to help food and drink businesses export and has invested heavily in a number of UK-based trade advisers as well as trade advisers overseas.  While well intentioned the network of UK advisers can at times appear uncoordinated – grouping products by region rather than sector/consumer audience – and often focussed on easy win events such as overseas trade fairs which may not be the most appropriate opportunities for alcoholic drinks producers.   The WSTA has worked well with a number of UK overseas posts over recent years to put on promotion events but the costs have been not insignificant and may well have put off a number of potential exporters.  It would be preferable if more of the costs – particularly Embassy time and input would be met by Government and not passed on to business.   

Possible questions 

 

Sustainability Agenda 

Like all businesses, the wine and spirit trade is committed to do all it can to reduce its environmental impact, to improve its sustainability, to reduce waste packaging and increase recycling and the use of recycled material.  But initiatives can often hit small businesses particularly hard.  All four UK Governments are looking to introduce a Deposit and Return Scheme and for this to include glass.  But it is possible that schemes will differ and so may well require different labels, with differing advice to the consumer, depending on which part for UK the goods are on sale.  For smaller producers, the economies of scale are such that this may well mean they choose not to place products on certain markets.   Consideration should be given to exclude SME producers from certain obligations by introducing a ‘de minimis level’ below which they are exempt or look to greater use of off-label solutions such as QR codes. 

Possible questions 

 

What improvements/changes could be made to encourage future trade