Wine and spirit businesses are calling on the government to scrap duty hikes and avoid prohibitive price rises, which will further fuel inflation.
With the government’s fiscal policies failing to control inflation, the Wine and Spirit Trade Association (WSTA) noted that there is little more than a month to go before the government is set to make matters worse with wine duty set to increase by 20% and spirits duty by over 10%.
Instead of doing all it can to bring down inflation, the trade body stated that the Treasury is ploughing ahead with plans to introduce the biggest single alcohol duty increases in almost 50 years, further exacerbating the cost-of-living crisis at a time when interest rates are at their highest since 2008.
The WSTA believes it’s “not too late to scrap crippling duty hikes” and bring some respite to wine and spirit businesses and consumers.
From August, all alcohol will be taxed by strength, meaning some higher ABV wines could disappear from UK supermarket shelves. As well as reducing consumer choice, the duty hikes will bring price rises for 90% of wines sold in the UK.
Spirits face a similar challenge as premium products such as gin, vodka and whisky must contain a minimum strength prescribed by law.
Miles Beale, Chief Executive of the WSTA, said: “We are careering towards an extremely tough period for wine and spirit businesses with tax hikes and other costs, including a prolonged cost of living crisis for their consumers, persistently high inflation – especially for food and drink – and rocketing prices for glass, leaving little room for many businesses to turn a profit. Inevitably some won’t be able to stay afloat, with SMEs most at risk.
“Amongst all this pressure, the government has chosen to impose more inflationary misery on consumers on 1 August, with the biggest single alcohol duty increase in almost 50 years. But it’s not too late to scrap these crippling duty hikes.
“Ultimately, the government’s new duty regime discriminates against premium spirits and wine more than other products. Wine from hotter countries – like new trade deal partner Australia – will be penalised most of all, because the grapes grown in hotter climates naturally produce higher alcohol wines. And at the same time, you cannot reduce alcohol in wine like you can for some other products. Making wine isn’t an industrial process; reducing wine’s alcoholic content is limited, changes the product, and is costly to carry out. Nor can the alcohol in full-strength spirits be reduced for products such as gin, vodka and whisky where a minimum strength is prescribed by law.
“In the end, the Sunak-Hunt changes to wine duty will reduce consumer choice and push up prices. For spirits, you can expect at least a £1 increase on a bottle of gin or vodka and a leap of £1 per bottle of wine when duty is increased by 20% (+VAT).
“Wine and spirit businesses are looking to find ways to keep their products affordable, but there is no quick fix, and there are too many tax and costs increases and too few options – especially for wine and full strength premium spirits where reducing ABV simply isn’t realistic.”
