Wine in the UK could go up by 29p a bottle because of sterling’s fall
The cost of a bottle of wine made in the EU in the UK could go up by 29p on average, according to the latest figures released by the Wine and Spirit Trade Association.
It calculates that the average bottle of wine coming from the EU could go up by 29p and by 22p for wine from outside of the EU because of the adverse ongoing trading conditions as a result of the plumetting pound.
Whilst on paper this appears a problem for the UK trade, particularly considering it imports 99% of the 1.8 billion bottles drunk in the country. But such huge prices will have a big knock-on effect around the world when you consider one in seven bottles exported globally is destined for the UK.
Patrick McGrath, managing director of UK wine distributors, Hatch Mansfield, said: “It is not well understood that the UK is the global hub of the international wine trade. The fall in the value of sterling is having a serious and immediate impact on importers. While currency fluctuations are an accepted risk for importers, three months on there appears to be little prospect of a return to pre-referendum values.”
He added: “The importers are having to meet the increased costs, which is already having a significant impact on profitability. In the immediate aftermath of the referendum we were covered forward for foreign currency. However this “cushion” has now run out. This will mean that we will be forced to increase our selling prices.”
The WSTA has analysed how the dramatic fall in sterling has already impacted on the wine industry since the referendum. Its figures show that because of the overall 15% drop in sterling’s value since June 23, the day of the referendum, the cost of importing EU wine could go up £225m per annum.
The cost of importing wine from outside the EU could increase by £188m per year.
If the situation continues then the cost the to the UK wine industry will be £413m the equivalent to a 10% hike in total alcohol duty. Whilst some of this may get passed on to the consumer, a large proportion will have to be swallowed up by the trade, warned the WSTA.
The figures are further ammunition in the WSTA’s bid to convince the UK government that wine should be treated more fairly in next year’s budget and should not have to face another duty rise in face of such increased costs and losses in profit.
Miles Beale, chief executive of the WSTA (pictured), explained: “We should be under no illusions that wine prices are likely to increase, which in the current climate could lead to a bottle of wine going up by 29p.
“This is of grave concern to the wine industry and it is vital that government come out in support of the trade which generates £17.3bn in economic activity.
“We are just weeks away from the autumn statement. Any increase in duty, on top of the post-Brexit Sterling devaluation, would have dire consequences on Britain’s wine trade.
“It is not only consumers who will feel the impact of price rises, but also by more than a quarter of million employees in the world leading UK wine industry.”
The UK wine industry directly employs 170,000 people and further 100,000 through its supply chain.
The UK is the 2nd largest trader in wine by volume (behind Germany) and by value (behind USA), cementing its role as a key international player, said the WSTA.
The UK wine and spirits industry in 2015 contributed £15.6bn to the Treasury.
Wine is also now the UK’s favourite choice of alcoholic drink, with 71% of adults drinking wine, the equivalent of 39m people.