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News
Spirits duty increase keeps inflation high in UK
The 10.1% spirits tax rise last August has been cited as a leading cause for higher-than-expected inflation in the UK in January.
The latest data from the Office of National Statistics (ONS) showed inflation remained at 4% in January.
Furthermore, news broke today (15 February) that the UK fell into recession at the end of 2023.
ONS data showed that gross domestic product (GDP) declined by 0.3% in the last three months of 2023. This was the second quarter in a row where GDP dropped, meaning the UK entered a recession.
However, it is not expected to last long due to a strong jobs market in the UK, combined with wages rising faster than inflation.
Graeme Littlejohn, director of strategy and communications at the Scotch Whisky Association (SWA), said: “Stubborn inflation is the backdrop to a very challenging environment across the industry.
“Due to the 10.1% duty increase last summer, inflation is higher than it otherwise would have been and the tax hike has cost the Treasury more than £100 million [US$125.6m] in lost tax revenue.
“By contrast, a cut in spirits duty in the March budget is a win-win, boosting growth and incentivising investment. The chancellor should use the budget to bring down duty and support businesses and consumers.”
As the spring budget nears, the drinks industry is amplifying calls for a duty cut for alcohol to ease inflation and support the sector. Duty was frozen in chancellor Jeremy Hunt’s autumn statement.
The UK Spirits Alliance noted the pressure rising inflation is putting on the hospitality industry.
In the last seven months, inflation on the price of spirits increased from 5% in July to 7.7% in January.
A survey conducted by the UK Spirits Alliance showed 70% of distillers in the UK were unsure about their ability to invest in their companies due to the duty increase last August.
“In our pubs and bars, consumers wanting to enjoy a gin and tonic, or a cocktail still find it increasingly expensive,” a spokesperson from UK Spirits Alliance said.
“That is why the spirits sector has written to the chancellor to urge him to cut duty in the March budget to ensure that buying a drink in a pub doesn’t become an unaffordable luxury.
“Bringing duty down would also be good news for a hospitality sector grappling with rising costs and warning of yet more closures; and good news for British distillers struggling to bounce back from last year’s record tax hike.”