UK to pay highest wine tax in Europe
Alcohol duty will now rise by 3.66%, pushing the UK to the top of Europe’s wine tax league and adding fresh pressure on pubs, producers and consumers alike.
The UK will now begin paying the highest wine taxes in Europe, according to reports published across many national papers over the weekend, in a move that delivers another blow to the country’s struggling pubs and drinks sector.
Alcohol duty is due to rise by 3.66% under changes announced by Chancellor Rachel Reeves at her Budget, increasing the cost of a bottle of full-bodied red wine by 14p.
As a result, the UK will overtake Finland to become the European country with the highest duty rates on 14.5% ABV wines. These include many popular full-bodied styles such as Argentinian Malbec and Italy’s Primitivo. Duty on a bottle of wine at this strength will stand at £3.33 in Britain, compared with around £3.29 in Finland, where high alcohol taxes are used as a tool to curb consumption.
‘No brewer or publican would want to inflict this on customers’
The increase comes just days after Reeves was forced to water down a proposed tax raid following a campaign highlighted by The Telegraph. The Chancellor has since unveiled what she described as a sweeping rescue package for pubs, which are facing the removal of Covid-era reliefs and a wave of business rate revaluations in April. She said pubs were “at the heart of British life”.
However, operators are now braced for higher drinks costs. According to the British Beer and Pub Association (BBPA), the duty changes will add 2p to the cost of a pint.
Emma McClarkin, chief executive of the BBPA, said the rise “unfortunately increase[s] the likelihood of further price rises, which no brewer or publican would want to inflict on their customers”.
She added: “For brewers, who already pay some of the highest rates of beer duty in Europe, this increase will add further strain to their already razor-thin profit margins and risk one of the UK’s world-renowned industries producing the greatest beers in the world.”
Allen Simpson, chief executive of UKHospitality, said the sector was facing “price pressures at every time”, urging suppliers to show restraint when it comes to raising prices and to recognise “the economic pressure the sector is under”.
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The Wine and Spirit Trade Association (WSTA) estimates that alcohol duty on a bottle of 14.5% ABV wine has risen by £1.10 since August 2023. Its chief executive, Miles Beale, said producers had “no choice but to increase prices in order to keep afloat, which unfortunately means consumers are going to take the hit once again”.
The duty rise comes on top of other cost increases for wine and spirits businesses, including Labour’s plans to increase employers’ National Insurance contributions and impose packaging levies.
According to WSTA estimates, the latest increase will add 12p to the cost of a bottle of white wine, while a bottle of gin will rise by 38p and Scotch whisky by 39p.
Beale added: “Despite the OBR [Office for Budget Responsibility] at last acknowledging higher prices lead to a decline in tax receipts, the Government fails to recognise that its own policy is benefiting no one.”
The WSTA estimates that weaker demand caused by higher prices will lead to a £180m fall in total alcohol duty receipts in the current financial year compared with last year. The trade body, which represents more than 300 companies, described the decision to push duties higher as “short-sighted” and warned it would only perpetuate the economy’s “doom loop”.
The duty increase is also expected to feed through to supermarket prices, further pressuring household budgets. Inflation in Britain’s shops has reached its highest level in two years, with food prices rising by 3.9% year on year, according to figures published by the British Retail Consortium last week.
This comes despite Government claims that it is taking action to bring inflation down, with Sir Keir Starmer placing the cost of living at the centre of his push to win back voters ahead of local and devolved elections in May.
Responding to the criticism, a Treasury spokesperson said: “Alcohol duty plays an important role in ensuring public finances remain fair and strong and funds the public services people rely on every day.”
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