Alcohol Prices Surge with New Excise Duty Implementation
As the popular “dry January” comes to a close, consumers are facing increased alcohol prices due to a recent excise duty hike. The UK government has implemented a 3.66% increase on alcohol duty, which directly impacts producers but is likely to result in higher prices at the consumer level.
Understanding the New Excise Duty on Alcohol
The excise duty on alcoholic beverages is calculated based on the strength (ABV) and category of the drinks. With the new duty structure introduced in August 2023, rates vary significantly across different types of beverages, including:
- Beer
- Cider
- Spirits
- Wine
- Other fermented products
Impact of the Duty Increase
The increase in duty means that consumers will pay more for their favorite drinks. For instance, the duty on a typical bottle of gin (37.5% ABV) has risen by 38p, bringing its total price to £8.98 after VAT. Additionally, a bottle of Scotch whisky (40% ABV) now sees its duty increased by 39p, raising its total to £9.51. For red wine at 14.5% alcohol, the duty has gone up by 14p.
Industry leaders have expressed concern over this hike, stating that it may force businesses to pass the increased costs to consumers. The Wine and Spirit Trade Association (WSTA) reported that the duty on a bottle of 14.5% red wine has risen by £1.10 since the new regime took effect.
Industry Reactions and Future Implications
Prominent figures in the spirits and brewing industries are alarmed by the duty increases. Emma McClarkin, chief executive of the British Beer and Pub Association, emphasized that these changes could lead to further price rises, straining already thin profit margins. Similarly, Miles Beale, chief executive of the WSTA, highlighted the complications arising from price changes related to the strength-based taxation of wine.
Comparison with EU Alcohol Duty Rates
| Country | Rank (Excise Rates) |
|---|---|
| Finland | 1st |
| Ireland | 2nd |
| United Kingdom | 3rd |
Recent comparisons show that the UK ranks third highest in alcohol excise rates among EU countries, just behind Finland and Ireland. This ranking raises concerns about the competitive position of UK producers.
Looking Ahead
As consumers prepare to enjoy alcoholic beverages after dry January, they face the reality of higher prices driven by new excise duties. Industry leaders are advocating for a comprehensive review of the current system, calling for a long-term plan that fosters growth and reduces burdens on the spirits sector. The current landscape has left many in the industry feeling overburdened and under threat, as prices are likely to reflect the new tax structure.
