The UK alcohol industry is bracing for significant tax increases starting February 1, which will directly impact the retail prices of alcoholic beverages. The latest duty hike, introduced by Chancellor Rachel Reeves, follows inflation adjustments based on the Retail Price Index (RPI) and will particularly affect products with higher alcohol content.
For wines with an alcohol by volume (ABV) of 14.5%, the tax will rise by 54 pence (0.68 USD) per bottle, while spirits like gin and vodka will see an increase of 30 pence (0.38 USD) due to a 3.6% tax hike. Fortified wines, including port and sherry, will also experience a 3.6% increase, whereas sparkling wines will receive a marginal tax reduction of 1 penny per bottle.
The most drastic change concerns taxation based on alcohol strength, meaning wines above 12.5% ABV will be taxed significantly higher. Since August 2023, these cumulative increases have already driven up the price of a 14.5% ABV bottle of wine by 98 pence (1.23 USD).
Additional costs will follow in April when new packaging recycling fees under the Extended Producer Responsibility (EPR) policy take effect. Spirits will bear an extra 18 pence (0.23 USD) per bottle, while wine prices will increase by 12 pence (0.15 USD). Given that the tax is weight-based, glass-packaged products will be hit hardest, with the added cost per bottle surpassing 10 pence (0.12 USD).
Industry leaders, including Miles Beale, CEO of Wine and Spirit Trade Association (WSTA), have condemned the tax hikes, arguing that they reduce sales, harm businesses, and fail to boost tax revenues. Hal Wilson, co-founder of Cambridge Wine Merchants, criticized the new system as a bureaucratic nightmare, highlighting the burden of determining precise ABV levels for thousands of wines before pricing them.
The beer sector is also under pressure. Heineken has confirmed a 2.97% price increase on draft beer in February, directly tied to the new recycling fee. Popular brands such as Birra Moretti, Heineken, Fosters, and Tiger may pass these costs on to consumers if pubs cannot absorb them.
The hospitality industry, already struggling with rising labor costs and economic uncertainty, faces further challenges due to changes in National Insurance contributions. The threshold will drop from GBP 9,100 to GBP 5,000, generating GBP 25 billion (31.74 billion USD) in tax revenue but increasing financial strain on businesses. Tim Martin, founder of Wetherspoons, warned that rising costs favor supermarkets over pubs, shifting alcohol consumption toward home drinking.
A glimmer of relief comes in the form of draught relief and small producer relief (SPR), measures introduced in the Autumn Budget to support pubs and small brewers. Effective February 1, these initiatives will provide GBP 85 million (108 million USD) in relief, slightly lowering the tax on draught products under 8.5% ABV by 1.7%. However, this translates to just 1 penny per pint, an amount industry representatives deem insufficient.
The British Beer and Pub Association estimates that by April, the sector could face an additional GBP 650 million (825 million USD) in costs due to tax increases and the removal of business rates relief. Many businesses fear they will have no choice but to raise prices, further impacting consumer spending and threatening the viability of pubs, bars, and restaurants.
