Spirits trade reacts to UK budget

Members of the spirits trade have expressed their disappointment in the UK government’s spring budget, saying it “falls short” of the support the industry needs.

In the spring budget announced yesterday (15 March), UK chancellor Jeremy Hunt confirmed that the government will cut the duty charged on draught products, while simultaneously announcing that tax on spirits will rise to 10.1% from 1 August, the largest duty hike in recent decades.

The duty increase was labelled a ‘hammer blow’ by members of the Scotch whisky industry, and a contradiction to the pledge the government made in 2019 to “review alcohol duty to ensure our tax system is supporting Scottish whisky”.

Miles Beale, chief executive of the Wine and Spirit Trade Association, said: “The government’s decision to punish wine and spirit businesses and consumers with a 10% duty hike for spirits and a massive 20% for wine, from 1 August, is staggering.

“This budget directly contradicts what this government claims it is trying to tackle. It will further fuel inflation, it will heap more misery on consumers, and it will damage British business, especially those in the hospitality supply chain, who are still trying to recover from the pandemic.”

Ed Baker, managing director of Kingsland Drinks Group, added: “The budget announcement to cut the duty charged on draught products is a welcome measure to protect UK pubs. It is both overdue and necessary. However, it’s also an alarmingly narrow decision that fails to recognise the struggles of the wider drinks industry and the assault it has endured in recent years.

“The chancellor’s failure to recognise the needs of the entire UK drinks industry in the budget is a disaster that will have catastrophic impact. The hike on prices will penalise all sectors, and ultimately hit the consumer hard, when they are already tackling the crippling effects of the cost-of-living crisis.”

However Andrew Carter, CEO of Chapel Down, said that while the duty increases are unwelcome news for producers, hospitality businesses, retailers and ultimately consumers across the country, the proposed new system, which sees drinks taxed according to their strength rather than category, “is a sensible and positive step”.

Hospitality ‘significantly impacted’

Members of the UK on-trade have also expressed concerns over the decisions made in the budget, which included no mention of a delay to the planned decrease in business energy support or any sector-specific package for the industry.

Sam Martin, CEO of Peckwater Brands, said: “Hospitality is a lynchpin of trade and employment, and can be a major driver for economic growth and recovery. Yet the sector is also more significantly impacted by today’s challenges than most, as they are both energy intensive and subject to the inflated price of goods, notably food costs.

“To allow hospitality to thrive, businesses required a major overhaul of the business rates system, a shot in the arm to staffing, and increased support with energy costs. The measures laid out for hospitality in the spring budget fall short of the level of support that industry leaders have been crying out for over the past year.

“Hospitality can be a driver for the economy and a source of both jobs and tax revenue, but without the right conditions to grow, we will likely see businesses shut down by high business rates, unaffordable tax bills and short staffing.”

Last month, Birmingham-based bar Pineapple Club closed its doors for good due to soaring energy bills.

He added: “Short-term support with energy bills may keep the lights on in the coming months, but without further action, the possibility of a return to pre-pandemic levels appears slim. I only hope more can be done to prop up businesses affected by rising costs, and that people will continue to support pubs, bars and restaurants in their communities.”

Sacha Lord, the night time economy adviser for Greater Manchester, added: “While the announcement on beer duties will enable operators to become more competitive against supermarkets and retailers, the current situation for the hospitality sector continues to be dire.

“In the face of rising bills, business rates and inflation, operators urgently need ongoing support and the chancellor’s announcements, or lack of them, will only further frustrate and anger the industry.

“By its very nature, hospitality is an industry with higher-than-average gas and electricity usage, and is a sector that has seen incredible economic damage over the past three years.

“It is therefore disappointing that the chancellor has not announced a delay to the planned decrease in business energy support or any sector-specific package for the industry.

“The tapering off of business energy support from the end of March has been forecasted to add £4.5 billion [US$5.43bn] to bills compared to the current scheme, and simply put, this will place the industry in an unsustainable predicament and create a sinkhole of financial difficulty for venues across the sector.

“A third of businesses are already cutting trading days as a result of spiralling energy bills and today operators will be even more concerned over how they will continue to pay bills and wages.

“Without energy support, a rise in insolvencies is inevitable as operators conclude the reality of running a business in hospitality is simply no longer financially viable.

“Sadly it is the smaller, independent and often family-run businesses which are taking the brunt of the economic downturn, and who once again are at the precipice of closure.

“I urge the government and treasury to reconsider its level of support for the UK’s fifth largest industry to avoid these unnecessary closures and job losses.

“We are an industry that has historically contributed £66bn (US$79.6bn) per year to the UK economy pre-Covid, and with the right intervention, I have no doubt the sector can thrive once again and aid the economic growth of this country.”