As of Sunday, February 1, the tax on alcoholic beverages in the UK will jump by 3.66%, a change that industry leaders say will inevitably lead to higher prices for consumers. This latest increase in alcohol duty, confirmed by Chancellor Rachel Reeves during the November budget announcement, is part of a broader trend of escalating costs impacting the nation’s drink sector.
Duty Increase Details
The new duty rates will see the tax on a standard bottle of gin (37.5% ABV) rise by 38p, bringing its total to £8.98 after VAT. Similarly, a bottle of Scotch whisky (40% ABV) will incur an additional 39p, increasing its price to £9.51. Wine drinkers will not be spared either, as the duty on a bottle of 14.5% red wine will increase by 14p. This latest hike follows a significant rise of £1.10 on red wine since the new alcohol duty regime was introduced in August 2023.
The Wine and Spirit Trade Association (WSTA) has voiced concerns about the cumulative impacts of these taxes, highlighting that the burden of these increases will ultimately fall on the consumer. The UK Spirits Alliance, representing numerous distillers, has urged the Chancellor to adopt a more growth-oriented approach in the upcoming duty review, aiming to eliminate what they describe as “spirits discrimination.”
Impact on Beer and Pubs
The beer sector is not immune to these changes either. For the first time since 2017, pubs will see an increase in beer duty, affecting both drinks sold in establishments and supermarkets. Emma McClarkin, CEO of the British Beer and Pub Association, stated that these adjustments threaten to exacerbate price rises, which would be unwelcome for both brewers and consumers.
With many breweries already contending with some of the highest beer duty rates in Europe, the impending increase places additional pressure on their already limited profit margins. To mitigate costs, some brands, such as Foster’s, have opted to lower their alcohol content to reduce duty expenses.
Industry Reactions
Industry leaders have expressed their frustration at the timing and rationale behind these new duties. Braden Saunders, a spokesperson for the UK Spirits Alliance, remarked that the hike comes just as many consumers are ready to indulge after “dry January.” He lamented that the spirits industry has become a target for successive governments seeking revenue, leaving producers struggling to stay afloat.
Allen Simpson, CEO of UKHospitality, echoed these sentiments, warning that hospitality businesses face mounting cost pressures. He urged suppliers to exercise caution in passing on increased costs to consumers, who are already grappling with a challenging economic environment.
In response, a Treasury spokesperson defended the government’s position, stating that the increased alcohol duty is vital for maintaining fair public finances and funding essential services. They noted that the government is also implementing measures to alleviate cost-of-living pressures, such as reducing energy bills and increasing the National Living Wage.
Why it Matters
The impending rise in alcohol duty is not merely a fiscal adjustment; it signals a broader economic challenge facing the UK. As consumers brace for higher prices at the bar and in stores, the ripple effect of this tax increase raises concerns about the resilience of the hospitality sector and the purchasing power of everyday Britons. With many industries already under strain, the government’s approach to alcohol taxes will be closely scrutinised as it seeks to balance revenue generation with economic sustainability.
