The hospitality industry has slammed a possible tax hike on wine and spirits, arguing that it would be a “depressing prospect” for the struggling sector.
Chancellor Rachel Reeves is considering a 4.5 per cent increase in taxes on alcohol in line with a higher reading of inflation, according to reports.
“We’re all fed up with having to put up prices up, because we know that it’s going to cheese off our customers, but we’ve got very little option,” said Clive Watson, founder of The City Pub Group.
“If we don’t put the prices up to pay for the tax increases, then the profitability of the business goes down even further.”
The Wine and Spirits Trade Association has estimated that a levy in line with inflation would add 14p on a bottle of Prosecco, 16p on a bottle of red wine and 47p in a bottle of gin.
“Another duty increase… is a pretty depressing prospect,” Miles Beale, chief executive of the Wine and Spirit Trade Association said.
Beale added that the other tax burdens facing the industry – including costly glass tax, the rise in National Insurance, minimum wage hikes and reduced business rates relief – are equally damaging, with prices up by a pound or more in a little over a year for wine and spirit consumers.
A series of “punishing tax hikes” have meant alcohol sales have “been in steady decline since 2023, which has proved to be extremely damaging for the sector,” Beale said.
So far this financial year, overall alcohol duty receipts are down almost £300m. If this trend continues for the rest of the financial year, then receipts are set to come down by almost £1bn than previously forecast.
‘Higher taxes means higher prices’
Watson warned that customers are being turned off their local pubs and restaurants due to ballooning prices.
“A lot of pub companies I know have deferred any capex plans for next year until the budget comes through,” Watson said.
“It doesn’t just affect the number of pubs or restaurants…[but the] staff who work in this. It affects all the associated industries, like the food suppliers, the drink suppliers.”
Of the 164,641 job losses in the UK since the Budget last October, almost 89,000 have been lost in hospitality.
The scale of job losses is three times worse than estimated by the Office for Budget Responsibility, which predicted 50,000 job losses as a direct result of changes to employer NICs.
“I don’t think the government understands that higher taxes means higher prices as well,” Watson said.
“This death by 1,000 cuts is is not helping anyone, least of all the government.”
Pubs and bars are closing at the fastest rate seen this century, City AM analysis found, as rising costs squeeze many in the hospitality sector to the point of collapse.
The number of British pubs and bar businesses appointing liquidators or administrators surged to 449 in the first 10 months of the year, the most in more than two decades, according to figures compiled using insolvency disclosures.
That represents a rise of five per cent compared to the same period last year, and a more than tripling compared to 2015, as hospitality firms wrestle with the fallout from the Covid lockdowns, last year’s tax rises and rising employment costs, plus weak consumer confidence.