On the back of a Budget that penalised wine and with the Government stepping up planning for a ‘No Deal’, the Wine and Spirit Trade Association met with Treasury Minister Robert Jenrick to voice industry concerns over duty hikes and Brexit fears.
The Chancellor was able to deliver some good news for spirit makers at the November Budget when he froze duty however, he chose to unfairly single out wine for a 3.1% RPI increase.
With the duty increase kicking in on 1st February this will inevitably lead to consumers seeing wine prices rise. Duty on an average priced bottle of wine will increase by a further 7p for still wine, 9p for sparkling and 9p for fortified wine. These numbers do not include VAT which will add a further 20% to these increases.
At the meeting between the WSTA senior team and Mr Jenrick on Monday (17th Dec) he was warned that duty hikes combined with a potentially disastrous ‘no deal’ Brexit paints a bleak picture for wine importers who have already been hit hard by the fall of the pound post referendum.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association said: “I met Robert Jenrick and told him that Government’s decision actively to single out wine for an increase at October’s Budget was a bitter blow to UK wine importers, who have already been hit hard by the devaluation of the pound. The UK wine industry has grave concerns over unfair duty rises, made worse by the prospect of a ‘no deal Brexit’.
Like most of the British business community, the wine and spirit industry would support any government proposal that met our requirements and that was likely to gain a majority in Parliament. Of the PM’s options that rules out ‘no deal’ and her current deal. And her third option – No Brexit – isn’t on the menu. Yet.
And, frankly, it’s the lack of feasible options – or any prospect of them until the new year – that is unacceptable for businesses trying to prepare for the future. The clock is running down, the government is letting us down and on top of this has chosen to punish unfairly wine and wine consumers with a duty rise. It would be laughable if it weren’t so serious. And decisions should certainly not have been put off until January.”
Since 2010 wine has been treated more harshly than other categories of alcoholic drink – +39% increase compared to +27% for spirits and 16% for beer.
This is despite proof that a freeze can benefit both the Treasury and UK businesses. Following the freeze in wine and spirit duty in the November 2017 Budget, between February to August 2018, wine duty income increased by £39 million, up 2% on the same time last year.
The WSTA team highlighted to Mr Jenrick the trade’s major concerns that Treasury forecasts, using OBR modelling, is based on flawed numbers and an underestimation of the elasticity of price increases on consumer behaviour.
Before the referendum result an average priced bottle of wine sold in the UK was £5.40, the latest figures from the WSTA market report reveal that an average priced bottle of wine has reached £5.73. From February 1st when wine duty increases wine prices are likely to rise again.