UK wine and drinks industry braced for four more years of inflationary duty rises
The UK drinks industry needs to brace itself for duty increases on alcohol for the next four years, after last month’s budget in which the Chancellor Philip Hammond announced an increase in duty on alcoholic drinks in line with inflation.
This is according to the chief executive of the UK’s Wine and Spirits Trade Association Mile Beale, who said that these increases will hit wine and spirits businesses “hard” , particularly taking into consideration the impact of Brexit and rising inflation that the industry is already having to contend with.
The recent increase in duty means that a bottle of wine in the UK has increased by a further 8p, while a 70cl bottle of 40% spirits by 30p, and even more than this if you include the additional VAT this attracts.
The Chancellor said that this was in line with inflation, which has soared from 1.66% in the 2016 budget to an estimated 3.9% later this year. This is far higher than was anticipated, even in November when it was predicted to be around 3.2%.
But Beale points out that the government has built inflationary increases into its forecasts, meaning that wine and spirits duty is expected to go up by more than 3% for each of the next four years, not just in this tax year.
“This is not the end of planned rises,” he said. “The government’s policy is to continue to inflict inflationary rises on all alcoholic drinks. – so watch out for the Chancellor’s sleight of tongue.”
This newly announced rise in duty will, theoretically, increase wine duty receipts for the Chancellor by a fifth, from £4 billion a year now to nearly £5bn in 2021/2022, and spirits duty by half a billion to £4bn.
“The irony of rising inflation is that for the government to change from an inflationary rise to a freeze or cut, costs – or appears to cost – it more and more. For example, freezing all duty yesterday would have taken £340m out of their forecasts this year, the same move last year would only have been £141m.”