Alcohol duty in the United Kingdom has been increased by 3.66 per cent, a move that aligns with the Retail Prices Index (RPI) inflation rate. This change, which took effect from Sunday, 1 February, has prompted significant concern from industry leaders who warn that businesses will be forced to pass on the additional costs to consumers through higher prices.
Impact on Consumer Prices
According to industry estimates, the duty hike will result in a notable rise in the cost of popular spirits. For instance, the duty on a typical bottle of gin is expected to increase by 38p, while Scotch whisky will see a 39p rise. This adds to the financial burden on households already grappling with inflationary pressures.
Wine and Beer Affected
The Wine and Spirit Trade Association has highlighted that since August 2023, the duty on a bottle of wine with 14.5 per cent alcohol content has increased by £1.10. Additionally, beer duty has risen for pubs for the first time since 2017, potentially leading to higher prices for pints across the country. This marks a significant shift in the alcohol taxation landscape, affecting a wide range of beverages.
Industry Calls for Reform
In response to the duty increase, the UK Spirits Alliance has urged Chancellor Rachel Reeves to use an upcoming duty review as an opportunity to foster growth within the sector. The alliance is calling for measures to address what they term "spirits discrimination" and to establish a coherent, long-term strategy for alcohol taxation. They argue that such steps are essential to support businesses and consumers alike.
Treasury Defence
The Treasury has defended the duty hike, stating that alcohol duty plays a vital role in maintaining public finances and funding essential public services. Officials emphasise that the increase is necessary to ensure sustainable revenue streams, particularly in the context of broader economic challenges. However, this stance has been met with criticism from industry representatives who fear it could stifle economic recovery.
Broader Implications
This duty change comes at a time when the UK economy faces ongoing inflationary pressures, with consumers increasingly sensitive to price rises. The alcohol sector, which includes wine, spirits, and beer, is a significant contributor to the economy, and any increases in costs could have ripple effects on retail, hospitality, and tourism industries. Stakeholders are closely monitoring the situation, hoping for a balanced approach in future policy decisions.
