Trade hails slowing alcohol price increases in UK

Increasing alcohol prices have slowed “dramatically” since the abolishment of the automatic tax escalator in the UK, new data has shown.

Rising alcohol prices have slowed since the automatic tax escalator was abolished last year

Following Chancellor George Osborne’s decision to end the automatic tax escalator on alcohol – which saw duty on wine and spirits increases 2% above the rate of inflation since its introduction in 2008 – volume declines have been halted in the off-trade.

The 2014 Budget also saw the Chancellor freeze duty on spirits and cut beer tax.

According to trade body the Wine and Spirits Trade Association’s (WSTA) Market Report, prices of wine and spirits grew by 2% – less than half the annual growth rate seen in the previous two years, and the lowest increase in five years.

“It’s welcome news for consumers that the Government’s decision to scrap the alcohol duty escalator and take the first steps towards rebalancing the duty regime is being passed on [to consumers],” said Miles Beale, CEO of the WSTA.

“The rates of price increase in the off-trade are the lowest we have seen for some years. Whereas average prices for wine and spirits have been increasing by about 4% or 5% every year due to the escalator, what’s surprising is how quickly its abolition has fed through to help prices grow much more slowly.”

Beale also claims these latest figures, and the fact the government cut spirits duty by 2% in the latest 2015 Budget, shows it has “recognised the benefits of a more stable and support tax environment”.

The recent Budget also saw the Chancellor cut cider duty by 2%, knock a penny off the price of a pint of beer and freeze wine duty.

WSTA’s Market Report also shows that alcohol volume sales in the on-trade continued to decline – however the 2% fall was the lowest decrease in five years, and values were up 2%.

Spirits volumes in the off-trade climbed slightly, thanks to growth in both gin and vodka. However, volumes decline by 4% in the on -rade with declines of 6% and 5% for vodka and whisky respectively.

Consumer interest in gin and Tequila remained strong, as the spirits bucked the trend of decline and grew by 8% and 17% respectively.

“Overall it’s a mixed picture for the trade. While it is welcome that the volumes are holding steady in shops and supermarkets and the decline in the on trade is slowing, it is still an incredibly tough trading environment for most businesses,” Beale added.