Some of the UK’s biggest wine retailers are bracing their customers for price rises due to changes to the way wine is taxed from February next year.
Majestic, Laithwaites, The Wine Society and Cambridge Wine Merchants are among the wine businesses that have launched a poster campaign and will be contacting their customer bases to warn that price hikes are coming down the line.
Excise Duty on all wines between 11.5% ABV and 14.5% ABV is currently the same amount and calculated according to a simple easement introduced as part of Rishi Sunak’s new duty system last year.
However, the easement is due to be removed when the single amount of duty paid on wines between 11.5-14.5% ABV – £2.67 – will be replaced with up to 30 different payable amounts according to the strength of the wine. For a bottle of wine at 14.5% ABV, this will see wine duty increase from £2.67 a bottle to £3.09.
Wine businesses, along with the Wine and Spirit Trade Association (WSTA), have been campaigning for over a year for the temporary easement to be made permanent, which they claim will avoid red tape costs, help businesses grow, keep prices down for consumers, and stabilise Treasury income.
However, the new government has given no indication yet that it will retain the easement permanently, which has prompted retailers to send communications to customers that some wine might disappear from the shelves and prices will increase.
In an email sent to Majestic and Cambridge Wine Merchants last week, the businesses warned: “At the time they launched the policy, the Treasury had a stated aim to create a duty system that would be simpler and fairer for wine businesses like ours to administer. Yet, as an industry, we firmly believe the system that is set to be introduced fails on both counts – it is more complex and will be much more costly. Businesses like ours will need to invest six-figure sums just to develop the systems required to handle the new approach, with ongoing administrative costs likely to run into similar sums on an annual basis.”
It goes on to say: “Today, wine is the most popular alcoholic drink in the UK. As a nation, we are the second-biggest importer of wine in the world, championing a diverse range of styles from all corners of the globe. Yet the Treasury’s insistence on pressing ahead with these changes from 1st February 2025 will threaten both of those statuses.
“Most concerningly for you as discerning wine drinkers, the quality and choice of wine available for you to purchase is likely to be negatively impacted. There is a genuine risk that the producers of your favourite wine will stop shipping it to the UK entirely, due to the additional administrative burden that will be involved in exporting wine to Britain. Smaller, family-run vineyards producing incredible wines are unlikely to change processes that have been in place for generations just to suit the UK market, when they could easily export their wines elsewhere in the world without additional admin or cost.
“We have fought vehemently to avoid any of these unwanted consequences playing out and have been engaging with Treasury officials alongside the Wine and Spirit Trade Association (WSTA), to lobby for urgent change. But with less than four months until this policy changes, we now feel obliged to tell you, our loyal customers, that these changes are coming. Whether your favourite wines increase in price, or disappear from shelves altogether next year, we, as an industry, will become powerless to protect you from that.”
Miles Beale, Chief Executive of the WSTA, commented: “We see a bleak warning from wine retailers who are so concerned about the impact of unnecessary and costly red tape due to come into force next year. They feel it is only right that their customers know that more price rises are coming down the line – thanks directly to government policy. This could still be avoided if the new government put a stop to Rishi Sunak’s decision to impose a huge bureaucratic burden on the UK’s wine industry.
“The new Prime Minister and Chancellor have been unequivocal in setting out the need to achieve economic growth and in signalling that the pressures on public expenditure mean difficult decisions will have to be taken at the Budget on 30 October. Abolishing the wine easement will do the exact opposite – and with no benefit for the public finances.
“Instead – by avoiding imposing damaging additional costs and red tape through maintaining the wine easement – businesses and consumers will benefit. There is still time to help boost British businesses in a potential-packed sector by maintaining the wine easement and freezing alcohol duty. It won’t cost government anything, but it will support British business by promoting conditions for growth and protect British consumers by keeping prices stable.”
Majestic’s CEO John Colley added: “The former Government intended to create an alcohol duty system that was simpler, fairer and less bureaucratic for businesses to administer, but it has failed on every measure. The proposed change of going from one duty band to 30 different bands based on ABV will be bad for consumers, retailers and hospitality operators.
“With less than three months until the wine easement is due to expire, we now feel compelled to warn our customer base of the confusion this will cause for them at the shelf edge, and the potential impact on the offering we provide at Majestic.
“But this is not just about Majestic. Removing the wine easement will disproportionately hit small businesses – including the 900 independent wine merchants operating across the UK and the many importers dealing with the international wine trade. This will restrict growth and threaten peoples’ livelihoods at a time when we should be doing everything we can to support our high streets.
“Together with the Wine and Spirit Trade Association (WSTA), Majestic have been engaging with MPs and Treasury officials on behalf of the industry to explain the stark impact that this Conservative policy will have on our industry. We hope to see evidence on 30th October that the Chancellor has addressed our concerns by reversing the decision of the former government, and helping small business and the industry by extending the wine easement.”
Alcohol sales in the UK have declined following last year’s largest alcohol tax hike for 50 years, which came into force in August 2023 and saw more than 10% duty increases for spirits and beer and at least a 20% increase in duty for most wine.
WSTA highlighted latest HMRC figures that show that between September to August, year-on-year, alcohol duty increases have resulted in a £1.3bn (10%) drop in revenues to the Exchequer.
NAM Implications:
- ‘going from one duty band to 30 different bands based on ABV’…
- …says it all, folks.
- And given government’s record and signals to date…
- …it is unlikely that positive change will take place.
- Meaning that pragmatists will have to work on the basis of coping with the new restraints.
- Operating in a reduced-choice market.
- With any growth coming at the expense of rivals…
