The Wine and Spirit Trade Association’s latest Market Report has revealed the average price of a bottle of wine has risen by almost 30p since the vote to leave the EU.
For UK wine lovers there is worse news to come as these figures do not take into account the impact of a painful planned 3.4% rise on alcohol duty expected to be delivered by the Chancellor in the Autumn Budget – adding another 7p to the average priced bottle of wine.
Before the referendum result an average priced bottle of wine sold in the UK was £5.40, the latest figures reveal that an average priced bottle of wine has reached £5.68.
The impact of Brexit saw the value of the pound plummet and has pushed up the cost of imports leading to rising inflation. WSTA Market Reports show that in the 18 months running up to the vote wine prices remained stable but since then have increased by 5%.
In October 2016 the WSTA warned wine drinkers they should expect wine coming into the UK from the EU to go up by an average of 29p a bottle as a result of Brexit. If government does not start supporting the UK wine industry the cost of wine could be ramped up even further.
As prices rise the WSTA Market Report also reveals that volume sales of wine in the UK are down dramatically. Between 2012 and 2015 wine volumes declined by 5%, but between 2015 and now, volumes have plummeted by 17%.
In the 12 months to mid-June out of the top ten countries selling the most wine to UK restaurants and bars, eight of those show declining sales. Only Italy – down to the popularity of Prosecco – and New Zealand have grown.
Following the EU Referendum in 2016 the UK wine industry has done its best to absorb rising import costs, but as predicted it was only a matter of time before any cushioning against the effects of a weaker pound ran out and costs were passed on to the consumer.
This has been exacerbated by extreme weather, with both frost and drought across Europe, production in major markets like Italy, Spain and France were down last year. In May this year Bordeaux was struck by one of the worst hailstorms in recent memory and markets for New World wine are also suffering, with wildfires in the USA dramatically reducing their production.
Miles Beale Chief Executive of the Wine and Spirit Trade Association said:
“The WSTA predicted that Brexit and the fall in the value of the pound, compounded by rising inflation, would force the UK wine industry to increase prices. Sadly, this is now a reality with the average priced bottle of wine in the UK now at an all-time high.
The Chancellor can take action to help both our industry and the consumer by freezing duty in his November Budget. Currently, duty is set to rise in line with RPI inflation, which in the current economic climate, not to mention price rises as a result of Brexit, is a painful and unnecessary blow to an industry that already has more than enough to contend with.
99% of the wine drunk in the UK is imported, making a no deal Brexit an extremely alarming prospect, particularly for those working in the wine industry. However, the one thing that is within the government’s control is excise duty. Government must start showing its support for the UK wine industry – and nearly 190,000 jobs that our industry supports – by tackling our excessive duty rates and freezing duty at the Autumn Budget.”
Wine is now the UK’s most popular drink. 64% of Brits drink wine, the equivalent of 33 million people.
55% of the money Brits pay for a bottle of wine, the equivalent to £2.16, goes on wine duty. It is even more for a bottle of sparkling wine at £2.77.
Fourteen countries in the EU have zero rates for wine and therefore only 21% of a bottle of wine sold in France or Spain is taken up in tax and 19% in Germany.
The UK wine industry contributed over £7.8 billion to the Treasury last year, and acts as a global hub for wine production. Much of the wine that is originally imported here is then reshipped to the EU, as well as markets further afield, particularly to the Far East and countries like China, Singapore and Hong Kong.
The UK is at the centre of the global wine trade accounting nearly 15% per cent of the world’s wine imports. The UK is the 2nd largest trader by volume (behind Germany) and by value (behind USA), cementing its role as a key international player.
Following independent analysis by EY, on behalf of the WSTA, their report found a duty freeze results in: “a favourable outcome for the UK economy, since economic activity is significantly higher”, while there is expected to be a “negligible impact on tax revenues”.
The WSTA has drafted a Budget submission document which has been submitted to the Treasury this week, clearly setting out that a further freeze on duty for all alcohol products will help an aspirational and innovative industry realise its potential.