Cost of pint to rise under new alcohol duty changes

The UK Spirits Alliance has written to Rachel Reeves urging her to use an upcoming duty review to drive growth

Wine and spirits industry leaders have issued a stark warning that businesses "have no choice but to increase prices" to remain viable, as a significant rise in alcohol duty takes effect.

The increase, confirmed by Chancellor Rachel Reeves in November's autumn budget, sees alcohol duty escalate by 3.66 per cent, aligning with the Retail Prices Index (RPI) inflation.

This change came into force from Sunday, 1 February.

While the tax is directly levied on alcohol producers, industry figures caution that a "trickle down" effect to shoppers is inevitable, particularly following a series of other cost increases in recent years.

Official data showed the duty on a typical bottle of gin, at 37.5 per cent alcohol by volume (ABV), will climb by 38p to £8.98, inclusive of VAT.

Similarly, a 40 per cent ABV bottle of Scotch whisky will see its duty rise by 39p to £9.51. Meanwhile, a bottle of 14.5 per cent red wine will incur an additional 14p in duty.

A bottle of 14.5 per cent red wine will see its duty increase by 14p (PA Wire)

The Wine and Spirit Trade Association (WSTA) said the tax on a bottle of 14.5% red wine has gone up £1.10 a bottle since the recent alcohol duty regime was introduced in August 2023.

The UK Spirits Alliance, which represents hundreds of distillers across the UK, has written to the Chancellor urging her to use an upcoming duty review to drive growth, end “spirits discrimination” and put in place a long-term approach.

Alcohol duties are partly linked to the strength of drinks, with beer below 3.5% ABV paying a significantly lower level of tax following an overhaul of duties in 2023.

A number of beer brands, such as Foster’s, have reduced their strength to 3.4% in recent months in a bid to reduce their duty costs.

The duty on beer will increase on drinks sold in both pubs and supermarkets, with pubs impacted for the first time since 2017.

Emma McClarkin, chief executive of the British Beer and Pub Association, said: “These changes unfortunately increase the likelihood of further price rises, which no brewer or publican would want to inflict on their customers.

“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.”

Alcohol duties are partly linked to the strength of drinks, with beer below 3.5 per cent ABV paying a significantly lower level of tax following an overhaul of duties in 2023 (PA Archive)

Miles Beale, chief executive of the WSTA, said: “Despite the OBR (Office for Budget Responsibility) at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is benefiting no-one.

“For the nation’s wine and spirit sector the complexities of price changes, especially for wine which is now taxed by strength, mean more red tape headaches ahead.

“Add to this all the other costs – including NI (national insurance) contributions, business rates and waste packaging taxes – and businesses have no choice but to increase prices in order to keep afloat, which unfortunately means consumers are going to take the hit once again.”

Braden Saunders, UK Spirits Alliance spokesperson and co-founder of Doghouse Distillery, Battersea, said: “The timing couldn’t be more ironic.

“Just as dry January draws to a close and people contemplate their first hard-earned drink, they’re met with higher prices at the bar.

“The spirits industry has been treated as a cash cow by consecutive governments, and the sector is on its knees.”

Allen Simpson, chief executive of UKHospitality, said: “Hospitality businesses are facing price pressures at every turn and our sector’s cost burden is growing at an unsustainable rate.

“Increases to alcohol duty, while not paid directly by operators, is another pressure, if it is passed on to businesses through higher drinks prices.

“We strongly urge suppliers to show restraint in doing so, recognising the economic pressure the sector is under.”

A Treasury spokesman said: “For too long the economy hasn’t worked for working people, and cost-of-living pressures still bear down.

“That’s why we are determined to help bring costs down for everyone.

“It’s why we’re taking £150 off energy bills, increasing the National Living Wage, ending the two-child limit, rolling out free breakfast clubs for all primary school children, and freezing fuel duty, rail fares and prescription fees.

“We need to rebuild the public services we all rely on.

“We’ve put record funding into our schools and NHS to give every child the best start in life and bring down waiting lists.

“Alcohol duty plays an important role in ensuring public finances remain fair and strong and funds the public services people rely on every day.”