Drinks sector reacts to UK budget 2021By Nicola Carruthers
The UK budget set out a number of investments and measures to help the industry recover from the pandemic. The Spirits Business has assembled views from across the drinks sector to see if chancellor Rishi Sunak has done enough.
Sunak took to the podium at the House of Commons today (3 March) for the annual budget, the second from the chancellor.
The drinks sector welcomed the announcement that alcohol duty had been frozen for the second year in a row.
Meanwhile, as one of the worst-hit sectors by the pandemic, the hospitality industry was given a number of new measures to help its recovery, including a grant of up to £18,000 (US$25,118) for businesses.
Furthermore, Sunak confirmed the extension of the furlough scheme and business rates holiday, while the 5% value added tax (VAT) reduction rate will be extended for six months until 30 September.
The responses from the drinks sector have been largely positive, however some trade groups have called for additional support.
To read the industry’s response, click through the following pages.
Trade body UK Hospitality said it appeared that Sunak had provided “crucial support” for the sector, however it said it was important that the industry sticks to its reopening date.
UK Hospitality chief executive Kate Nicholls said: “The chancellor has announced support to help our sector get back up and running, now it is vital that the government sticks to its date of June 21st for a full reopening of the sector. Delay would see more businesses fail, more jobs lost and undo much of the good work the chancellor has done to date.
“An extension of the 5% VAT rate was absolutely crucial for hospitality businesses. Confirmation that the government will provide support for a full year will bring peace of mind to the sector.
“While it would have been better to have extended the 5% rate further, it is now vital that the government looks at introducing the interim rate for hospitality on a permanent basis. It would be a positive legacy of an otherwise dreadful year for our sector. A permanent reduced rate of VAT for hospitality would redress the unfair tax imbalance that our businesses have faced for too long and make us internationally competitive.”
On business rates, Nicholls welcomed the elimination of the fixed cost, which will provide “much-needed breathing room” for businesses.
Furthermore, she said the upcoming revamp of the rates system must “deliver a wholly new system of business tax that no longer unfairly penalises our sector”.
Nicholls also welcomed the new grants for the industry, but noted that businesses “need them as quickly as possible” and with capped interest rates.
Nicholls also called the alcohol duty freeze a “pragmatic step”, but hoped that the government would consider a separate rate for on-trade alcohol.
Furthermore, Nicholls said the “biggest gap in support remains the outstanding sector rent debt”.
She said: “We need the government to announce an extension of the moratoria at the earliest opportunity and work with industry to establish a landing zone to resolve this £2bn millstone around our recovery.”
Scotch Whisky Association
Trade group the Scotch Whisky Association (SWA) said the freeze on spirits duty was “good news for hospitality and gives distillers some breathing space”.
The SWA called on the chancellor to establish a clear timetable for the review of UK alcohol duty and implementation of a ‘modern’ alcohol tax system.
The association also voiced its concerns over the US tariffs on Scotch, which have caused “real damage” to exports.
Karen Betts, chief executive of the SWA, said: “What’s really important to us is that the government redoubles its efforts to resolve the 25% tariff imposed by the US on single malt Scotch whisky. This stems from an unresolved trade dispute between the EU, UK and US governments over subsidies to aerospace in breach of World Trade Organization rules.
“It is causing real damage to our US exports, which have fallen by over half a billion pounds since the tariff came into effect. And it risks impacting permanently Scotch whisky’s market share in the US, which has long been one of our most successful markets.
“The chancellor must also set out a clear timetable for the reform of the UK’s outdated system of alcohol taxation. Now the UK has left the EU, we can modernise and reform the duty system to ensure that it is clear and fair both to businesses and consumers.”
Wine and Spirit Trade Association
The Wine and Spirit Trade Association (WSTA) said the duty freeze was a ‘vital lifeline’ for British distillers.
Miles Beale, chief executive of the WSTA, said: “The decision to freeze wine and spirit duty comes as a huge relief for British businesses, pubs, restaurants and its suppliers following the crushing – and continuing – closure of the hospitality sector, for months on end, during the pandemic.
“Chancellor Rishi Sunak seems to ‘get it’. He understands that supporting our industry will allow it to recover, rebuild, create jobs and – in time – replenish revenues to the Treasury.”
The WSTA said the UK spirits industry is worth around £11bn (US$15.3bn) in economic activity and supports some 230,000 jobs.
Furthermore, Beale welcomed the VAT cut extension on soft drinks and food, but said it was disappointing to not have it extended to cover alcohol. Beale said the move could have “given the trade a real boost when they are finally allowed to reopen their doors to the public”.
Dayalan Nayager, managing director of Diageo Great Britain, said: “We thank the chancellor for providing much-needed stability by freezing alcohol duty. The last year has been incredibly tough and today’s decision, along with other measures to help the trade, gives the industry confidence to meet the ongoing challenges in these critical last months before reopening.”
On the upcoming Alcohol Duty Review, Nayager said the firm welcomed the opportunity to work with the government on bringing “greater fairness to the duty system and spirits producers across the UK”.
Scottish Hospitality Group
Trade body Scottish Hospitality Group (SHG) said the budget unveiled “significant measures”, however for Scottish firms the “devil will firmly be in the detail”.
SHG spokesperson Stephen Montgomery also welcomed the extension of the furlough scheme but said it was “not free for businesses, particularly as the chancellor has announced that employer contributions will rise in July and August”.
Furthermore, he said it was “worrying” that Sunak had not confirmed if the Job Retention Bonus would still be paid.
Montgomery continued: “The chancellor cannot simply take this vital payment away from businesses who have been subsidising the furlough scheme and fought so hard to stay viable and protect jobs during the last year.”
He also urged for the 5% VAT cut to be extended until April 2022 “as this is only a benefit to us when we are able to trade”.
Montgomery added: “On the restart grants and recovery loans announced, the scale of the chancellor’s commitment is encouraging but what we need to hear now is Scottish government matching these grants from Barnett Formula Consequential money. We are now calling on Scottish ministers to provide urgent clarity.
“This is not about which government ultimately does what, it is about giving Scotland’s hospitality sector every chance to recover and rebuild. If we get commitment from both governments, our hope is that by 2022, the hospitality sector will not only be reopen but growing and investing in their future. The super-deduction announced by the chancellor will provide strong incentives for businesses to invest, but we need to make sure they get through the next year first.”
Liam Manton (pictured right), co-founder of English producer Didsbury Gin, also welcomed the chancellor’s move to freeze duty on alcohol.
He said: “Since 2015, the number of distilleries in the UK have grown to record numbers and brands like ours supports hundreds of jobs and contributes billions to the UK economy each year. Any increase in alcohol or spirits duty would have stifled innovation and growth for many companies in our iconic industry.
“We’re pleased that the chancellor is backing both the spirits and hospitality industry to ensure we can continue to innovate, drive growth and firmly put us all on the road to recovery.”