‘This extra burden may be the end’: Hospitality warns of closures amid alcohol duty increase

The drinks industry has warned of “thousands more” pub and distillery closures amid a planned increase in the price of alcohol coming into force this weekend.

 

In the Autumn Budget announced late last year, Chancellor Rachel Reeves stated that alcohol duty rates on non-draught products will increase on 1 February 2025 in line with the Retail Price Index, currently at 3.65%.

 

It comes after a freeze on alcohol duty rates was implemented in autumn 2023 by the former Conservative Chancellor Jeremy Hunt. That summer, the former government undertook a complete reworking of the alcohol duty system whereby alcohol would be taxed according to strength.

 

However, this weekend (Saturday 1 February) marks the end date for this freeze, meaning alcohol with a higher alcohol content, such as wines and spirits, will incur more tax.

 

At the time of Reeves’ October announcement, the UK drinks industry expressed disappointment and anger, with Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA) saying the decision “is a real kick in the teeth” for businesses and consumers.

 

He added: “Recent history has shown us that duty increases lead to price rises for consumers, a dip in sales and, as a result, fewer receipts for the Treasury. The near £500m loss in alcohol duty receipts, in the last six months, couldn’t make that clearer.”

 

While most wine and spirits will see an increase in cost, Reeves declared that draught duty would be cut by 1.7%, “which means a penny off a pint in the pub”.

 

Stephen Russell, spokesperson for the UK Spirits Alliance (UKSA), which represents more than 280 distilleries and micro-businesses in the UK, said: “Pubs are more than pints – a third of all alcoholic drinks sold across hospitality are spirits. Today’s decision won’t stop thousands more pubs and distillers closing down.”

 

The UK Spirits Alliance has since written to the Chancellor warning of the alcohol duty increase’s “crushing” impact on the sector.

 

Suppliers have also expressed concerns, with Jordan Morris, founder of Abingdon Distillery in Oxford, stating “we’re taking the hit from literally every angle” amid a 13% increase in sugar costs and grain for whisky now costing £925 a tonne, almost double what it cost prior to the invasion of Ukraine in 2022.

 

Kathy Caton, founder and managing director of Brighton Gin, added: “Instead of celebrating a British business success story, successive Chancellors have chipped away at the spirits sector and the 1 February tax increase could be the final nail in the coffin for many.

 

"For many distillers and their staff this extra burden may be the end, seeing the closure of great local and community businesses that have provided employment - and ironically seeing lower contributions to the Treasury.”

 

The changes will impact hospitality operators too, with Marianna Sivalli, senior operations manager at Vinoteca in London’s Bankside, commenting: “At Vinoteca, wine is at the heart of everything we do, but rising costs, such as this weekend’s tax increase, are making it increasingly difficult to balance quality and value.

 

"The pressure to adapt quickly is immense, demanding constant research and difficult decisions. We’re working more closely than ever with our suppliers and winemakers, frequently adjusting our wine lists just to keep up. 

 

“However, the challenges facing the wine industry cannot be tackled in silo. We urge the government to recognise the unique pressures our sector faces, and to work with us on policies that support sustainability, innovation, and growth. By fostering a fairer taxation structure and by providing targeted assistance, we can protect the future of the wine industry in the UK.” 

 

Emma McClarkin, chief executive of the British Beer and Pub Association, added: "British brewers and pubs pour billions into the economy, support more than a million jobs, and are at the heart of communities. 

 

"Whilst we welcome the government’s acknowledgement of the sector and the cut to draught beer in the last Budget, we need to see further cuts in beer duty to get close to the European average. We pay far more than our European neighbours, with the UK paying 12 times more duty than Spain and Germany. Indeed, the increase in packaged beer is a step the other way and another burden our sector will have to shoulder."

 

She added: "Following the wider Budget announcements, pubs and brewers now face an April cliff edge, when a further £650m extra in costs will begin. This includes the reduction of vital business rates relief, staggering new employer costs, and the beer bottle packaging tax, all which will stifle growth and investment.

 

"We urge government to quickly introduce meaningful business rates reform and phase in new costs so that pubs can thrive and our sector help deliver growth."

 

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