UK: Alcohol sector preparing for tax increases from February 1st

The wine and spirits sector in the United Kingdom is preparing for a tax increase that will directly impact the retail price of many alcoholic beverages. Starting February 1, the rise in alcohol duties, announced in the Autumn Budget by Chancellor Rachel Reeves, will make various products more expensive, particularly wines with higher alcohol content, Vinetur reported on January 30.

The new taxes, adjusted according to the Retail Price Index (RPI) inflation rate, will add up to 54 pence to the price of a 14.5% ABV bottle of wine. For spirits such as gin and vodka, the increase will be approximately 30 pence per bottle due to a 3.6% tax hike. Fortified wines, including port and sherry, will also see a 3.6% increase, while the tax on sparkling wines will decrease by 1 penny per bottle.

The most significant change affects wines, which will now be taxed based on their alcohol strength. This means that wines with an alcohol content above 12.5% ABV will see substantial price increases, with the highest hikes for those with the most alcohol. Since August 2023, the accumulation of these increases has already raised the cost of a 14.5% ABV bottle of wine by 98 pence.

Another financial burden will come in April with the implementation of additional packaging recycling fees, adding approximately 18 pence to the cost of spirits and 12 pence to that of wines. Under the new regulation, companies will bear the costs of collection and recycling, which were previously covered by local governments. The industry has warned that this will be particularly costly for glass-packaged products, as the tax will be calculated based on container weight. The additional cost for glass bottles alone could exceed 10 pence per unit.

The wine and spirits industry has reacted with concern to these changes, arguing that higher taxes not only affect consumers but also reduce sales volume and, consequently, tax revenue. The Wine and Spirit Trade Association (WSTA) has criticized the measure, saying it does not contribute to economic recovery and instead threatens the viability of many businesses in the sector.

Breweries also anticipate negative effects. Heineken has confirmed it will raise the price of draft beer by 2.97% in February due solely to the new recycling fee. Brands such as Birra Moretti, Heineken, Fosters, and Tiger may pass these increases on to consumers if pubs are unable to absorb the additional costs.

The hospitality sector, already struggling with rising labor costs and economic challenges, will also be affected by the reduction in the National Insurance contribution threshold, which will drop from £9,100 to £5,000. This measure is expected to generate an additional £25 billion in tax revenue, but industry representatives warn it could worsen the crisis in bars and restaurants, many of which have shut down in recent years due to declining consumer spending.

The chairman of Revolution Bar Group described the tax changes as a damaging blow to the industry, while the CEO of Fuller's brewery warned that beer prices in its establishments could rise by at least 10 pence. Wetherspoons founder Tim Martin emphasized that rising labor costs impact bars and restaurants more than supermarkets, shifting alcohol consumption toward home drinking and away from hospitality venues.

The British Beer and Pub Association has warned that the sector could face an additional £650 million in costs by April when all tax changes take effect alongside the removal of relief on business rates. Industry representatives fear that many businesses will be forced to raise prices further, affecting consumer spending and threatening the sustainability of bars, pubs, and restaurants across the country.

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