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Fans of full-bodied pink wines and boutique gins must shell out extra from subsequent week as post-Brexit alcohol duty guidelines come into pressure within the UK, whereas those that desire beer danger ending up paying the identical for a weaker lager in an indication of “drinkflation”.
First set out by Rishi Sunak in 2021, the new system goals to encourage shoppers to chop again by taxing a drink in line with its alcohol content material fairly than placing it in certainly one of 4 classes: wine and made-wine, beer, spirits, and ciders.
At the time, the then-chancellor billed the overhaul as “the most radical simplification of alcohol duties for over 140 years”, enabled by Britain’s exit from the EU. In March, the federal government additionally introduced a higher draught relief on beer bought in pubs as a part of a “Brexit pubs guarantee”.
Carl Hanley, who runs the almost 500-year-old Hand and Shears within the City of London, is amongst publicans who count on the duty — which will probably be linked to retail value inflation — to have little affect on prospects’ habits. He mentioned his regulars “don’t ask the price. They tap their cards and say ‘No worries’.”
However, producers and suppliers have warned that the foundations will result in a drop in gross sales volumes of sure wines and spirits, and a squeeze on craft distillers.
“There will undoubtedly be volume drops,” mentioned Andrew Bewes, managing director of specialist wine distributor Hallgarten & Novum. “It’s more evident in retail — suddenly that £9.99 wine becomes £10.50 and the volume will drop massively.”
According to the Wine and Spirit Trade Association, which represents greater than 300 corporations, 80 per cent of the wine consumed within the UK is purchased in supermarkets and smaller retailers. At current, the duty on a bottle of wine with an alcohol share by quantity of 15 per cent or much less is £2.23.
From August 1, because of an easement that may finish in February 2025, nonetheless and glowing wines with an ABV of between 11.5 per cent and 14.5 per cent will probably be taxed an additional 44p, the speed for a bottle with 12.5 per cent ABV.
Wines stronger than 14.5 per cent ABV pays a sliding scale of duty: the levy on a bottle of port with 20 per cent ABV, for instance, will leap from £2.98 now to £4.28. Still wines below 11.5 per cent ABV, which make up 12 per cent of complete wine produced, will see duty cut back.
A wine’s energy relies upon partially on the local weather of the area the place it’s produced, making it troublesome to decrease alcohol content material. Reducing the alcohol content material in beer is, in contrast, comparatively easy.
Many brewers have in current months lowered the alcohol of their beers to keep away from being hit by increased duty from August 1, whereas others have launched new low-alcohol merchandise. Carlsberg has reduce the ABV of its Danish Pilsner model from 3.8 per cent to three.4 per cent, whereas Greene King has trimmed the ABV of its Old Speckled Hen from 5 per cent to 4.8 per cent.
The follow has been dubbed drinkflation owing to similarities with “shrinkflation”, wherein meals packaging sizes are lowered however costs stay the identical or rise.
“What we’ll see is consumers end up paying the same prices they have been for a product with less alcohol in it,” mentioned Simon Hales, analyst at funding financial institution Citi. “Either way, the consumer ends up getting a rawer deal, with the exception of a small benefit for draught product in pubs.”
No- and low-alcohol drinks have boomed as youthful shoppers prioritise wholesome residing. In 2022, “no- and low-” gross sales in 10 world markets, together with the UK, rose by 7 per cent 12 months on 12 months to greater than $11bn, in line with analysis group IWSR, with non-alcoholic merchandise accounting for 70 per cent.
Adnams chief govt Andy Wood mentioned the Suffolk-based brewer had launched Lighthouse, a 3.4 per cent ABV pale ale, which will probably be unaffected by the new guidelines as a result of it falls into the bottom band for alcohol content material.
“It’s good for us in that we’re not paying so much duty, but there are benefits in it for consumers too,” mentioned Wood. He added that the corporate’s 0.5 ABV beer Ghost Ship was its second-best vendor, and that older and youthful shoppers alike have been chopping their alcohol consumption.
Craft brewers in the meantime will profit from a 50 per cent duty discount prolonged by ministers to smaller producers making drinks with lower than 8.5 per cent ABV.
But Alan Powell, founding father of the British Distillers Alliance, mentioned it was “glaringly unfair” that the small producer reduction didn’t cowl full-strength merchandise.
“It’s a very dogmatic way of looking at it because no one is going to be swilling a strong craft product,” he mentioned, including that some BDA members have been opting to shut fairly than shoulder the additional prices linked to increased duty.
Braced for successful to gross sales are Paul Sharrock and his spouse Cheryl, who started distilling a small-batch gin of their storage in 2019. Their enterprise was boosted by the at-home ingesting increase sparked by pandemic-related restrictions in 2020, which allowed them to open a distillery and store in Stockport.
After holding again value rises regardless of hovering enter prices in 2021 for worry they’d damage his revenue, Sharrock this week lifted the price of a bottle by £1, according to the duty enhance of 10 per cent.
“The more we looked at it, we saw we’d be hard pushed to sell gin at [a higher] price,” mentioned Sharrock. He now plans to diversify the enterprise away from gin gross sales by specializing in distillery excursions.
“The thing that frustrates me is [the government] will spin it one way to the public — that they’re supporting people with the Brexit pub guarantee nonsense and small producers relief — but none of it applies to the spirits industry.”
The authorities mentioned: “For the first time in over 140 years the UK’s alcohol duty system will start making sense as a drink’s tax will reflect the amount of alcohol in it, making everything easier to understand.”
It added that the adjustments would assist “small craft spirit and wine producers innovate new lower-strength products”.