Budget 2021: Reaction from the Industry

The drinks industry is popping corks today at the news that the UK’s archaic and over-complex alcohol duty system is going to be radically overhauled – however the delay before it comes into effect concerns many while others don’t feel the Chancellor went far enough. 

The Wine & Spirit Trade Association (WSTA)

Miles Beale chief executive of the WSTA, said the decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, “giving everyone a much-needed break to help them recover from the pandemic”.

“Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector,” he said. “By offering continued respite to the UK wine and spirit sector his actions will help save jobs and – in time – replenish revenues to the Treasury through growth in our potential-filled sector.

“We welcome the reduction of the sparkling wine super tax, which is long overdue. We look forward to seeing the detail of a new system which should remove the existing unfairness of how different products are treated.”

Emma McClarkin, Chief Executive of the British Beer & Pub Association (BPPA)

The BBPA welcomed the range of business-boosting measures unveiled by the Chancellor, saying that overall the measures would help pubs recover from the pandemic and play a leading role in “levelling up the economy and building stronger, more vibrant communities throughout the country”.

“Pubs pay 2.5% of Business Rates despite accounting for only 0.5% of rateable turnover – an overpayment of £570m. Cancelling the rates multiplier and cutting rates for pubs by 50% for one year is a much-needed boost to our sector in its fragile recovery,” she said.

“The 50% cut to business rates alone will save pubs £169 million. However, the cap of £110,000 per business is a huge dampener and means a significant number of pubs will not benefit from the relief at all.

“The multiplier freeze will save English pubs £32 million.

“The announcement that business rates revaluations will happen more frequently is also welcome, as is the one year improvement allowance. However, we remain concerned that for the longer term the inherent unfairness of the business rates system for pubs has not been addressed.

“The Chancellor’s decision to freeze beer duty instead of the RPI linked increase he had planned is to be warmly welcomed. It will save £177 million and secure 9,000 vital jobs across the country. Clearly, the Chancellor listened to the 134,000 people who signed the Long Live The Local petition calling on him to support pubs and brewers in the Budget.

“Pub goers will also be toasting the Chancellor today for announcing a 5% lower duty rate on draught beer worth £62 million. This is great news for our local pubs and recognises the crucial role they play in our economy and society. However, the overall beer duty rate in the UK remains amongst the highest in Europe. It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.

“Beer is a low-strength product and breweries have invested heavily in developing a range of innovative, exciting and great tasting low and no alcohol beers. We therefore welcome proposals to reduce duty on lower-strength products as part of the proposed modernisation of the alcohol duty regime to better incentivise the consumption of lower-strength drinks.

Andrew Hawes, chairman of the Champagne Agents Association and MD of Mentzendorff & Co.

 “Overall, this has been a good Budget for pubs as they recover from the pandemic. The measures announced today will help pubs and breweries play a leading role in levelling up the economy and building stronger, more vibrant communities throughout the country.”

“I very much welcome the decision of the Chancellor to remove the long-standing additional duty on Champagne and Sparkling wine, that will now be correctly aligned with still wines of the same alcoholic strength – the tax on the bubble has finally been abolished!”

UK Hospitality 

Live tweeting its reaction, UK Hospitality said that the Chancellor’s announcements simplifying – and in many cases reducing – alcohol duties, was “great news for pubs, bars and restaurants, and will benefit all. The Chancellor has shown real innovation and creativity in reforming an archaic system of duty, which we applaud.”

“It called the one year 50% business rates discount for retail, hospitality, & leisure sectors “great news for our business,”, adding that “We have been lobbying hard for significant reform of the outdated business rates system and therefore very much welcome the Chancellor’s move today to extend the 50% business rates relief for the hospitality and leisure sector for the next financial year.”

However it added that as “positive as these #Budget2021 announcements are, hospitality remains incredibly fragile, facing myriad critical issues, it is imperative the Government goes further to support businesses in our sector.

James Calder, chief executive of the Society of Independent Brewers 

“The Chancellor’s Budget introduced radical changes to the outdated Alcohol Duty system which will benefit brewers of lower strength beers, traditional cask beer and create a more level playing field between small breweries and cider producers.

“The lower rate of duty for beer sold in pubs is a huge win for the industry and something which SIBA has been campaigning for. We look forward to working with the Treasury as they implement this landmark policy. Whilst hugely beneficial for producers of Real Ale, which is sold in forty litre casks, most craft keg beer in the UK is sold in thirty litre kegs, meaning they cannot benefit. By amending this lower threshold to twenty litres the Treasury can ensure all independent breweries benefit from this welcome new duty relief on draught beer.

“Furthermore the Freeze in Beer duty, taking effect from tonight, is very helpful at a time when brewers are seeing a myriad of other supply and running costs rising, and the Business Rates Relief for pubs will be welcomed by many in a struggling sector.

“The new Small Producer Relief scheme builds on the hugely successful Small Breweries Relief scheme (SBR) and we will continue to work constructively with The Treasury to implement positive reform of SBR that does not see small independent breweries worse off.

“Cutting business rates bills for hospitality premises by 50% for the next year is also hugely beneficial and SIBA would like to see the definition of those premises expanded to cover all breweries, taprooms, bars and pubs.”

Paul Davies, CEO, Carlsberg Marston’s Brewing Company (CMBC)

“Many across the brewing industry, and the hospitality sector which it supplies, will welcome the Chancellor’s decision to reform the alcohol duty system. It is an intervention which will provide much needed long-term economic support to those sectors hit hardest during the pandemic. A one year 50% business rates reduction for the hospitality sector will also be widely welcomed, and comes at a pertinent time, with potential Covid-19 restrictions looming.

 “It’s clear ‘The Local’ still has a place in the British public’s hearts and there is a ground-swell of public support for pubs and breweries, with more than 130,000 signatories, via the Long Live the Local campaign, having called for the Government to support our sector. It appears the Chancellor was listening.

 “Furthermore, the beer duty freeze will be a relief for our sector until the changes to alcohol taxations come into effect in February 2023.

 “The Chancellor has introduced a series of measures today which not only recognise the contribution the sector makes to the economy, but also the significant role pubs play in communities up and down the country.”

Ed Baker, MD at Kingsland Drinks Group, said:

“We wholeheartedly welcome cancelling the predicted rise in alcohol duty rates – it will certainly go some way in boosting the industry’s ability to recover in the toughest trading conditions in recent history. We also welcome the breaks afforded to the hospitality, leisure and retail industries; they have borne the brunt of the pandemic and Brexit in many ways and continue to do so. This decision will prove crucial as the industry recovers.

“It should be noted that inflationary pressures relating to supply chains, the price of energy and the cost of living will have to be fed through into the prices that people pay.

“The Chancellor’s decision to overhaul duty rates addresses a longer-standing need for fairer taxation across the alcohol industry, but the detail as to how this will impact individual sectors in practice remains to be seen.

“As we embark on what’s expected to be another challenging year, we hope the reforms and new business rates give British businesses some much needed respite.”

Andrew Carter, CEO of English sparkling wine producer, Chapel Down 

Andrew Carter, CEO of English sparkling wine producer Chapel Down, said it was encouraging to see support and recognition of the industry’s success from the governement.

“English wine is a 21st-century success story, and demand for Chapel Down’s award-winning sparkling wines has never been higher. It’s very encouraging to see the support and recognition of the industry’s success at a governmental level, which is the best endorsement we could hope for. The English wine industry is one of the UK drinks industry’s fastest-growing categories, and consumers are discovering the quality on their doorstep,” he said.

“The duty saved will enable the industry to create jobs, support families, and bring even more young talent into this exciting, developing sector as it recovers from the pandemic. The English wine industry – comprising of 3,800 acres under vine, 800 vineyards, 178 wineries – is expanding rapidly and governmental support provides the opportunity to build English wine on a global level.”

He noted the critical acclai that English sparkling wines are receiving internationally, adding that “The Chancellor’s patronage will make us more competitive against our worldwide competitors and this change will enable us to reinvest in our business and to continue growing at pace. Chapel Down, along with the wider English wine industry, will be raising a toast to the Chancellor for his support this week.”

Stephen Davies, CEO of Penderyn Distillery (The Welsh Whisky Company) 

“We have been campaigning for a freeze on duty which has been achieved so that is good news for the immediate future although we should keep in mind that we still have one of the highest alcohol duty regimes in the world.”

“The hospitality industry really needs more action now though and so a lack of immediate progress there is a worry.”

Liam Manton, co-founder of Didsbury Gin 

Liam Manton, co-founder of Didsbury Gin said that the Chancellor had not gone far enough to help small craft distilleries.

“It’s good that some industry concessions have been made, but in our opinion doesn’t go far enough.

“The message we’ve received today is confusing for businesses like ours – and we’re waiting for clarity, but additional tax on high ABV drinks will present a real challenge to craft distillers like us. Did you know that on average 70% of the price of a bottle of gin is already tax? That and additional VAT means smaller businesses and brands like Didsbury Gin face a monumental challenge when trying to capture market share from bigger conglomerates.

“SMEs like ours are the backbone of the British economy and are working tirelessly to innovate within the category whilst competing against large organisations. This move from the chancellor could put businesses like ours at a competitive disadvantage in the long run. The chancellor has said they will support craft producers, but it’s not clear yet how.

“When the pandemic hit, companies like ours didn’t hesitate to help the vital community services, switching production to make hand sanitiser. Any tax rises will punish small growing businesses like ours. Distillers want to keep investing, growing, creating jobs, supporting our partners and supply chains, including in hospitality.

Sue Rathmell, partner at MHA

However,  accountancy group MHA, described the lack of an extension to the reduced VAT rate was a “a crushing disappointment” and the business rates relief and freezes on duty rates for alcohol would not be able to compensate the hospitality sector for the return of the full 20% VAT rate in April 2022.

“In today’s autumn budget, the Chancellor ignored the widespread call from the hospitality industry, including 200 bosses, for the VAT rate on hospitality businesses to be held at 12.5%. This is a crushing disappointment for the sector,” she said.

“The UK tourism sector was badly hit by the Covid-19 pandemic and was hoping for an extension of the VAT cut to help efforts to rebuild. This is a massive blow to the cinemas, theatres, festivals, restaurants, pubs, hotels, theme parks and zoos around the whole of the country. Businesses were hoping that the Chancellor would allow them to enjoy another summer with the lower VAT rate, encouraging people to holiday in the UK. Instead they have been disappointed yet again.

“Now the reduced VAT rate will return to the full standard rate of 20%, with effect from 1 April 2022 as previously announced. The sector was given the benefit of a 5% rate from 15 July 2020 to 30 September 2021 and the rate increased to 12.5% from the start of this month.

“However, there were some good measures in the budget. Pubs will be pleased to see duty rates on alcohol being frozen for another year, together with the consultation on the reform of alcohol duties and a potential cut in duties being applied to draught beers and ciders. In addition up to 400,000 retail, hospitality and leisure properties should feel the benefit of £1.7 billion business rates reliefs which could halve their business rate bill.

“Overall there is some hope for the recovery of the sector, but the lack of continuing VAT support is a huge disappointment.”