Licensed Trade Faces Fresh Cost Pressures as Alcohol Duty Increases

The hospitality sector is bracing for another round of price increases as alcohol duty rates climb this month, adding fresh financial strain to an industry already grappling with multiple cost headwinds.

The latest adjustment to alcohol taxation, which came into effect yesterday (1 February), represents a 3.66 per cent increase tied to retail price inflation measures announced during last autumn’s budget presentation by Chancellor Rachel Reeves.

Industry representatives have warned that the increase will inevitably reach consumers’ pockets, as producers and distributors operate with minimal capacity to absorb additional levies in the current economic climate.

The duty adjustment affects various alcoholic beverages differently based on strength. Industry calculations indicate that spirits products face particularly notable increases, with gin and whisky bottles seeing duty rises of several dozen pence per unit when value-added tax is factored in.

Wine products, taxed according to alcohol content under reforms implemented in August 2023, will also see incremental increases depending on their strength profile.
The timing has attracted comment from trade observers, as the duty rise coincides with the period immediately following January, when many consumers traditionally abstain from alcohol purchases.

Sector organisations have expressed mounting frustration with the cumulative burden of taxation changes since the current alcohol duty framework was introduced eighteen months ago.

Representatives point to substantial increases in the total tax applied to common wine products during this period.

Michael Kill, CEO NTIA: “Today’s warnings from drinks industry leaders that further price rises are inevitable underline the intense and ongoing financial pressure facing hospitality and the night-time economy. With alcohol duty rising in line with inflation and supplier costs continuing to increase, many businesses have little choice but to pass these costs on to consumers – despite already fragile trading conditions.

“This comes at a time when broad sections of hospitality and the night-time economy have once again been overlooked for meaningful business rates relief. While limited, targeted support is welcome for some, it does little to address the reality facing restaurants, bars, nightclubs, late-night venues and the wider supply chain, all of whom are contending with rising rates, taxation, staffing costs and regulatory burdens.

“Selective support is simply not enough. Without a comprehensive, sector-wide approach, rising supplier costs and tax pressures will inevitably lead to higher prices, reduced consumer spending, and business closures. The night-time economy supports over 2 million jobs and contributes billions to the UK economy. It is time for Government to recognise its value and deliver fair, inclusive support that allows the sector to survive and grow.”

Miles Beale, chief executive of the WSTA, said: “Despite the OBR (Office for Budget Responsibility) at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is benefiting no-one.

“For the nation’s wine and spirit sector the complexities of price changes, especially for wine which is now taxed by strength, mean more red tape headaches ahead.

“Add to this all the other costs – including NI (national insurance) contributions, business rates and waste packaging taxes – and businesses have no choice but to increase prices in order to keep afloat, which unfortunately means consumers are going to take the hit once again.”