Leading figures in the drinks industry have issued a stark warning that businesses across the sector are being compelled to raise prices for consumers following the latest increase in alcohol duty, which came into effect on Sunday 1 February.
No Alternative to Price Rises
Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), stated unequivocally that companies have been left with no viable alternative but to pass on higher costs to customers. This follows confirmation in Chancellor Rachel Reeves' autumn budget that alcohol duty would rise in line with Retail Prices Index (RPI) inflation, resulting in a 3.66% increase from the beginning of February.
"Despite the OBR at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is benefiting no-one," Beale said. He highlighted the additional burden of national insurance contributions, business rates, and waste packaging taxes, which collectively force businesses to increase prices simply to remain operational.
Specific Impact on Spirits and Wine
Official data illustrates the direct financial impact of the duty changes. The tax on a standard bottle of gin, with an alcohol by volume (ABV) of 37.5%, will increase by 38p to £8.98 after VAT is applied. Similarly, a bottle of Scotch whisky at 40% ABV will see its duty rise by 39p to £9.51. For wine, a bottle of red at 14.5% ABV faces a 14p increase.
The WSTA has calculated that since the introduction of the new alcohol duty regime in August 2023, the tax on a bottle of 14.5% red wine has increased by a substantial £1.10. This regime links duty partly to the strength of drinks, creating what some industry voices describe as "spirits discrimination."
Industry Calls for Reform
The UK Spirits Alliance, representing hundreds of distillers nationwide, has written to the Chancellor urging a review of the duty system. They advocate for a long-term strategy that fosters growth and ends what they perceive as unfair treatment of spirits compared to lower-strength beverages like beer.
Braden Saunders, spokesperson for the UK Spirits Alliance and co-founder of Doghouse Distillery in Battersea, expressed frustration at the timing. "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," he remarked. Saunders argued that the spirits sector has been treated as a cash cow by consecutive governments, leaving it in a precarious financial position.
Hospitality Sector Under Severe Pressure
The duty increase compounds existing challenges within the broader hospitality industry. Recent analysis has revealed that pubs and bars are closing at the fastest rate witnessed this century, as rising operational costs push many establishments to the brink of collapse.
Figures compiled from insolvency disclosures show that 449 pub and bar businesses appointed liquidators or administrators in the first ten months of the year. This represents a five per cent increase compared to the same period last year and a more than threefold rise since 2015.
The sector continues to grapple with the lingering effects of Covid-19 lockdowns, last year's tax increases, rising employment costs, and persistently weak consumer confidence. This perfect storm of financial pressures is creating an unsustainable environment for many traditional British pubs and licensed venues.
Industry observers note that some beer producers have already taken strategic steps to mitigate duty costs, with brands like Foster's reducing their strength to 3.4% ABV to qualify for significantly lower tax rates under the 2023 duty overhaul. However, such options are not available to spirits and wine producers, who face a more complex and costly taxation landscape.
