Five years after Brexit, Brits celebrate with more expensive alcohol
A new tax system means higher prices for some of the U.K.’s favorite tipples.
In 2021, Britain’s teetotal, Coca Cola-swilling former Chancellor Rishi Sunak announced a “radical simplification” of the country’s alcohol taxes. And it was all thanks to Brexit.
“Now that we’ve left the EU, we have the freedom to do things differently and deliver a simpler, fairer tax system,” Sunak proclaimed. “Our reforms make the alcohol duty system simpler, fairer and healthier.”
It hasn’t quite turned out that way.
As Brexiteers toast five years outside the single market, the final stage of the post-Brexit taxation system is just about to come into force. While inside the bloc, U.K. alcohol duties were set by EU rules. According to Sunak, simplification would have been impossible while still a member.
But the result, according to Britain’s wine industry? Higher prices for some of the country’s favorite tipples.
On Feb. 1, in addition to an alcohol duty rise of 3.6 percent, the number of tax bands for wine will increase from one to 30 — with the cost applied to a bottle ranging from £2.45 to £3.09.
It’s all part of the post-Brexit system first rolled out in August 2023, which will see booze taxed based on volume of alcohol rather than the type of drink.
‘It fails on every level’
The U.K.’s wine industry claims the move will ultimately lead to price increases, less variety and more paperwork.
“The changes are bad news for consumers, bad news for businesses, and even bad news for the public finances,” said Miles Beale, chief executive of the Wine and Spirit Trade Association, which represents 300 U.K. wine and spirit businesses. “It fails on every level.”
As a result of the changes, WSTA expects the price of a bottle of strong red wine with an alcohol content of 14.5 percent to increase by 54 pence. Taking into account the previous duty hikes introduced in August 2023, duty will have increased by 98p in just 18 months.
“That basically means it’s an extra pound just in tax since the first of August in 2023,” Beale said. “An average bottle of wine is about £7.50 so you’re suddenly increasing it by about a pound. That is a massive percentage increase and I think consumers will really notice it.”
The changes will hit smaller retailers the hardest, he warned.
“A lot of supermarkets don’t have a particularly wide range of wine, whereas a small wine specialist on the high street is likely to have many more,” Beale pointed out. “Now they have to work out a different tax amount on every single bottle they bring in, which is very complicated. They may decide to reduce their range, and actually every single retailer we have spoken to is going to do that, pretty much.”
A key issue is that it is notoriously difficult to determine the alcoholic strength of wine, which is determined by climate and can vary between vintages, creating more paperwork.
The changes are yet another hammer blow for wine businesses, many of whom will also be grappling with the recent national insurance hike, living wage increases and changes to business rates.
‘Welcome like a hole in the head’
James Ellis, director of Ellis Wines, a family wine merchant established in 1822 in West London that supplies hospitality businesses, said the changes were “welcome like a hole in the head.”
“Not only has [the government] increased national insurance, which has cost businesses a fortune, they are hitting the hospitality industry with further taxes related to duty,” he said. “The bureaucracy that they are creating by having so many different duty bands is just eye-watering. I just don’t understand why they had to ... make duty in the U.K. more complicated.”
Ellis fears the added cost could lead to a decrease in orders. “If I am supplying a restaurant that buys 100 bottles a week, will those consumers that go into that restaurant still buy 100 bottles a week because the price has gone up?” he wondered.
A key issue is that it is notoriously difficult to determine the alcoholic strength of wine, which is determined by climate and can vary between vintages, creating more paperwork. | Christopher Furlong/Getty Images
Eventually, Beale fears, the U.K. will become a less attractive market as a result, with wine producers put off by the increased cost and red tape.
The previous Tory government was not insensitive to the administrative and financial burden of the new regime on wine businesses. To relieve the pressure, they put in place a temporary “easement” period, during which all wines of between 11.5 percent and 14.5 percent alcohol by volume were subject to the same £2.67 in tax.
The wine industry held out hope that this stay of execution would be made permanent at the Labour government’s first budget last year. But their hopes were dashed when Chancellor Rachel Reeves announced that the changes would be going ahead as planned in February.
It’s also bad economics, Beale contested, at a time when the government is trying to plug its “£22 billion black hole.”
“Rishi originally wrote this up as being good economics. But we’ve told them that demand is already suffering. They keep putting taxes up and actually, every time they freeze [alcohol] duty they get a bit more in terms of revenue.”
‘Modernized and simplified’ system
The Labour government, meanwhile, stands by the view that the changes are positive. A Treasury spokesperson said: “The alcohol duty reforms have modernised and simplified the duty system, prioritising public health and incentivising consumption of lower strength products.”
Steve Finlan, CEO of the Wine Society, a wine business serving over 180,000 members with a range of around 1,800 wines, estimated his business costs will increase by between £3 million and £3.5 million this year as a result of duties.
As a result, he says, the Wine Society is freezing recruitment and has no choice but to pass on some of the costs to the consumer.
Despite the Wine Society’s attempts to lobby the Labour government, he claims their concerns aren’t being taken seriously.
“The thing with this government is that they don’t have a lot of business experience. We as an industry have got some cracking ideas for ways in which they can get what they want out of it and we can get what we want out of it and consumers get what they want out of it.
“But it is certainly not moving to a new duty regime which is complex and adds even more red tape.”