UK duty increases driving drinks firms out of business

Published: 19 October, 2012

"Unsustainably" high levels of alcohol duty are a major factor in the recent collapse of a number of drinks importers and distributors, according to senior trade figures.

Steve Barton, joint director of Brand Phoenix, believes the UK's number two spot (after Ireland) in duty leverage across the eurozone, is driving firms to the brink. Since 1993, UK duty on still wine has risen from £1 per bottle to £1.90, coinciding with a 28% devaluation in sterling against the New World wine index.

"It's absolutely unsustainable. No one's putting the blame on duty," said Barton of the recent WaverleyTBS collapse. The government should take a degree of responsibility for these job losses and money owed to creditors. The duty spike between 2008 and 2012 has been incredible. They're taxing the living daylights out of the wine industry."

He said looking at tax and duty together, and a VAT increase of 20%, had seen recommended retail prices increase by 48% in the past seven years. "All of the major suppliers have tried to keep wine affordable to keep the category moving forward. That's caused bankruptcies," he said.

He added that increased duty "absolutely annihilates your cash flow": six years ago you would have paid £6.43 on six bottles of wine, now it's £11.43.

WSTA chief executive Miles Beale said: "The government needs to wake up to the pressure that year-on-year duty increases, combined with the growing regulatory burden, is putting on the wines and spirits sector. The UK alcohol industry is one of the most heavily taxed in Europe - with the highest rate of excise duty on still wine in the EU and the third-highest excise duty rate for spirits."

He added: "High taxation is placing businesses under enormous pressure, threatening their ongoing sustainability and putting jobs and growth at risk. The recent collapse of WaverlyTBS, taking with it 685 jobs, is an example of what can happen when the industry is not adequately supported."

Patrick McGrath, managing director of Hatch Mansfield, said: "Year after year the fight against duty is taking its toll on the trade. The off-trade's already down 3% this year. Coupled with exchange rates it's forcing wine up to levels consumers are kicking back on."

He said it was forcing suppliers to consider higher-priced markets ahead of the UK.

Printer friendly version