UK wine merchants are sounding alarm bells as their livelihoods are increasingly at risk following a sharp 4.1% decline in sales in the run-up to Christmas.
According to new data from the Wine & Spirit Trade Association (WSTA), retailers sold 10 million fewer bottles of wine during the festive period compared to the previous year.
The downturn wasn't limited to wine alone, as spirits sales also took a hit, dropping by 7.1% over the same 12-week period leading up to Christmas. This decline translates to 7.7 million fewer bottles of spirits sold, while sales of beer and cider also saw slumps.
Industry leaders squarely placed the blame on the government's decision to hike taxes last August. The increase saw taxes rise by 20% on most wine bottles and more than 10% on full-strength spirits, exacerbating the financial strain on consumers already grappling with a cost-of-living crisis. As a result, many consumers scaled back their purchases of wine and spirits.
The repercussions of these tax hikes have been far-reaching. Government figures indicate a staggering GBP 436 million (EUR 510 million) decline in tax revenues from wine and spirits sales between September 2023 and January 2024 alone. When factoring in losses from beer and cider tax revenues, Treasury coffers suffered a cumulative shortfall of nearly GBP 600 million (EUR 701 million).
Ahead of the upcoming Budget announcement, scheduled for Wednesday, the WSTA has urged Chancellor Jeremy Hunt to address the situation by slashing alcohol duties and streamlining the tax system. CEO Miles Beale emphasized the urgency, stating, "Wine and spirits businesses nationwide are calling on the government to take decisive action in this week’s Budget: support British businesses and bolster Treasury revenues by cutting alcohol duty."
Beale highlighted that the record-high duty hikes implemented last August have backfired, fueling inflation and significantly reducing excise duty receipts for the Treasury.
Currently, UK consumers pay GBP 2.67 (EUR 3.12) in tax on a standard 12.5% alcohol by volume (abv) bottle of wine, a stark contrast to the mere GBP 0.03 (EUR 0.04) paid by French consumers. The substantial double-digit increase in August marked the highest in nearly five decades. Should further inflation-linked duty hikes be announced this week, taxes on a bottle of wine could surge to GBP 2.80 (EUR 3.27), while those on spirits could skyrocket to GBP 8.71 (EUR 10.18).
Retailers are also apprehensive about proposed plans to introduce 30 different tax bands based on alcohol by volume, replacing the current single band. Majestic Wine CEO John Colley expressed grave concerns, labeling the proposal detrimental to retailers, hospitality businesses, consumers, and the wine industry alike. He warned of potential adverse effects on international wine producers entering the UK market due to increased bureaucracy, potentially limiting choices for British consumers.
Colley stressed, "This policy is anti-business, anti-growth, and anti-jobs. It threatens the livelihoods of thousands of people working in high street retail and hospitality sectors."
In conclusion, the plea from industry leaders is clear: a reduction in alcohol duty would not only shore up Treasury revenues but also safeguard British businesses, prevent further price hikes for consumers, and mitigate potential job losses across the sector.
Source: Decanter