Drink Prices Set to Soar as Alcohol Duty Increase Takes Effect
Consumers across the United Kingdom are bracing for higher drink prices as a significant alcohol duty increase comes into force this week. The 3.66 per cent rise, confirmed by Chancellor Rachel Reeves in November's autumn budget and aligned with Retail Prices Index inflation, took effect from Sunday, 1 February.
Industry Warns of Inevitable Price Rises
Wine and spirits industry leaders have issued stark warnings that businesses "have no choice but to increase prices" to remain viable following the duty hike. While the tax is directly levied on alcohol producers, industry figures caution that a "trickle down" effect to shoppers is inevitable, particularly following a series of other cost increases in recent years.
Official data reveals the substantial impact on popular spirits:
- The duty on a typical bottle of gin (37.5% ABV) will climb by 38p to £8.98, including VAT
- A 40% ABV bottle of Scotch whisky will see its duty rise by 39p to £9.51
- A bottle of 14.5% red wine will incur an additional 14p in duty
Spirits Industry Calls for Reform
The UK Spirits Alliance, representing hundreds of distillers nationwide, has written to the Chancellor urging her to use an upcoming duty review to drive growth, end what they term "spirits discrimination" and establish a long-term approach to alcohol taxation.
Braden Saunders, UK Spirits Alliance spokesperson and co-founder of Doghouse Distillery in Battersea, expressed frustration: "The timing couldn't be more ironic. 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."
Complex New System Creates Challenges
The current alcohol duty system, introduced in August 2023, links taxation partly to drink strength, creating what industry leaders describe as "red tape headaches" for businesses. Beer below 3.5% ABV pays significantly lower tax, prompting some brands like Foster's to reduce their strength to 3.4% to cut duty costs.
Miles Beale, chief executive of the Wine and Spirit Trade Association, highlighted the cumulative burden: "Add to this all the other costs – including national insurance contributions, business rates and waste packaging taxes – and businesses have no choice but to increase prices in order to keep afloat."
Pubs Face Additional Pressure
For the first time since 2017, pubs will be impacted by beer duty increases alongside supermarkets. Emma McClarkin, chief executive of the British Beer and Pub Association, warned: "These changes unfortunately increase the likelihood of further price rises, which no brewer or publican would want to inflict on their customers."
Allen Simpson, chief executive of UKHospitality, added: "Hospitality businesses are facing price pressures at every turn and our sector's cost burden is growing at an unsustainable rate."
Government Defends Duty Policy
A Treasury spokesman defended the increase, stating: "Alcohol duty plays an important role in ensuring public finances remain fair and strong and funds the public services people rely on every day." The spokesman highlighted other government measures to support households, including:
- Taking £150 off energy bills
- Increasing the National Living Wage
- Ending the two-child limit
- Rolling out free breakfast clubs for all primary school children
- Freezing fuel duty, rail fares and prescription fees
The Wine and Spirit Trade Association revealed that since the new alcohol duty regime began in August 2023, the tax on a bottle of 14.5% red wine has increased by £1.10 per bottle. Industry leaders now await the Chancellor's upcoming duty review, hoping for measures that will support rather than burden the struggling sector.
