Drinks industry slams ‘hammer blow’ Spring Budget

Yesterday’s Spring Budget announcement of increases on alcohol duty in line with inflation has been severely criticised by various drinks industry bodies.

The conclusion of the freeze on alcohol duty on 1 August in favour of duties that increase with inflation, at 10.1% RPI, was only briefly mentioned in Chancellor Jeremy Hunt’s speech before he then switched focus to the “Brexit pubs guarantee”. This measure means that the draught duty on beer in pubs across the UK (including Northern Ireland after the recently-agreed Windsor Framework) will be up to 11 pence lower than that in supermarkets. Hunt quipped: “British ale is warm, but the duty on a pint is frozen.”

While the Campaign for Real Ale (CAMRA) welcomed the cut on draught duty, chairman Nik Antona suggested that the lack of energy bill support beyond 1 April and the conclusion of business rate support schemes in 2024 puts pubs and brewers at risk of “having to close for good”.

British Beer and Pub Association (BBPA) CEO Emma McClarkin said that even the draught relief announced would have a limited impact after 1 August: “…the fact is, our industry will be facing an overall tax hike not a reduction come August. Duty on non-draught beer will rise and the measures introduced today won’t rebalance the catastrophic impact soaring inflation and unfair energy contracts are having on both pubs and the breweries that supply them.”

The wine and spirits sector was especially incensed. The rises mean that the duty on a bottle of still wine will increase by 44p a bottle, for Port it will go up by £1.30, and for a bottle of vodka it will rise by 76p. This would mark the biggest increase on wine duty in the UK since 1975, and the biggest for spirits since 1981.

Wine GB CEO Simon Thorpe MW said: “We have been hit with an unprecedented increase in duty in the budget. With the other inflationary increases in fuel, dry goods and costs of production an increase of the selling price of our wines will be unavoidable and may well impact on sales and be potentially damaging for our producers. This is very disappointing for a growing category such as ours.”

But, Thorpe has identified one silver lining to this summer’s duty overhaul: “One positive note, which we knew already, is that sparkling and still wine duty will finally be levelled out from August, which will benefit our sparkling wines, which up until then have had to pay a higher rate of duty than still wines.”

Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA), did not see the positives, and accused the Government of trying to “punish” businesses and consumers alike: “This Budget directly contradicts what this Government claims it is trying to tackle. It will further fuel inflation. It will heap more misery on consumers. And it will damage British business, especially those in the hospitality supply chain, who are still trying to recover from the pandemic…After all the effort to relaunch hospitality supply chains in 2022, the Government is offering no help in 2023 for the wine and spirit trade – and particularly for the UK’s 33 million wine drinkers who will see their – and the nation’s – favourite drink hit with a 44p duty rise in the midst of a cost-of-living crisis.”

Scotch Whisky Association (SWA) chief executive Mark Kent was similarly damning: “This is an historic blow to the Scotch Whisky industry. The largest tax increase for decades means that 75% of the average priced bottle of Scotch Whisky will be collected in tax, reducing already tight margins for an industry which employs tens of thousands of people and invests hundreds of millions annually across the UK.”

“In addition,” Kent continued, “the Chancellor has chosen to further increase the competitive disadvantage faced by the industry in the UK by giving additional tax breaks which are not available to the vast majority of distillers. Spirits account for more than a third of hospitality sales, but the extension of ‘draught relief’ cuts out 99% of the spirits sector, alienating both producers and consumers who choose premium quality drinks.” The SWA has called for a meeting with Hunt to discuss reversing the 10.1% tax hike.

Nuno Teles, managing director of Diageo GB, dubbed it a “hammer blow for pubs, drinkers and for Scotch”, and urged the Chancellor to reverse the hike.

Amid the criticism, there were some who looked largely favourably upon these forthcoming changes.

One such voice was that of Andrew Carter, CEO of English sparkling producer Chapel Down, who said: “From an overall drinks industry perspective, the duty increases are unwelcome news for producers, hospitality businesses, retailers and ultimately consumers across the country.”

“However,” Carter continued, “the proposed new system which sees drinks taxed according to their strength rather than category, is a sensible and positive step. We remain very positive about the support being shown for the English sparkling wine producers, and the changes to the duty levels will support the continued investment in the growing English wine industry.”

Paul Davies, CEO of Carlsberg Marston’s Brewing Company (CMBC), called draught duty relief a “positive” step and suggested that the forthcoming alcohol duty review would “drive innovation in the low- and-no category”, but acknowledged that a hike on duties would “limit brewers’ ability to invest in the UK and potentially result in higher prices for consumers”.

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