Draught pints will cost 1p less from the beginning of February following a cut in alcohol duty. The 1.7% tax drop on the production of draught alcohol announced in last year's Budget is the first alcohol duty cut in a decade. Critics, though, have warned increases in employers' National Insurance contributions and minimum wage rises mean pint prices will likely rise again as pubs pass on higher costs to customers.
A relief for craft alcohol producers also takes effect from the start of next month, with both policies costing the government £85 million. The relief applies to draught drinks below 8.5% ABV, equaling a 1p tax cut on the average-strength pint. This measure will influence three-fifths of all alcoholic drinks sold across pubs, according to government estimates.
Meanwhile, the small producer relief allows reduced duties for products beneath 8.5% ABV yet tapers as production increases. The Society of Independent Brewers and Associates has welcomed these policies, stating they will help pubs compete against cheaper alcohol sold at supermarkets.
Despite this, some critics argue the tax reliefs won't sufficiently counterbalance other announcements made by Chancellor Rachel Reeves. Starting from April, the minimum wage is set to rise by 6.7% for individuals aged 21 or older, reaching £12.21 per hour. Concurrently, companies will face increased National Insurance contributions, and some pub owners anticipate increases of 30p to 40p per pint due to these added employment costs.
Tim Martin, chief executive of Wetherspoons, has publicly stated, "Higher employment expenses would cost the firm £80 million a year." He criticized the new measures, claiming they have "a significantly bigger impact on pub and restaurant companies than supermarkets" and branded politicians as "dinner party goers, rather than pub goers".
British Beer and Pub Association CEO Emma McClarkin described how pubs and brewers "now face an April cliff edge." On the other hand, labor unions defend the increase of the minimum wage, criticizing larger firms for "pleading poverty" amid substantial profits. The UK government has maintained the rise in National Insurance payments was necessary for stabilizing public finances.
These alcohol duty changes arrive at a time of struggles for the hospitality sector, with reports from several bars, pubs, and restaurants indicating their venues are "eerily quiet" due to consumers cutting back on spending during the current cost of living crisis.
Looking beyond draught products, consumers are now facing price increases on wines and spirits due to new tax regulations. Starting February 1, 2025, the taxation on wines and spirits will adjust based on their strength, with the duty on a bottle of gin rising by 32p and wine at 14.5% ABV increasing by 54p. Originally delayed, these changes were set to come effective on August 1, 2023, but faced opposition and suspension under the Conservative government led by Rishi Sunak.
The Wine and Spirit Trade Association (WSTA) has estimated the cost hikes will considerably affect average consumers, projecting a 14.5% ABV bottle of red wine could see price increases of up to 98p over 18 months due to these duty hikes. With additional increases looming concerning waste packaging recycling fees set to come in April—12p for wine and 18p for spirits—consumers will have to brace for raising costs.
WSTA chief executive Miles Beale has criticized the government's attitude toward alcohol taxation, saying, "There are no winners under the UK’s punishing alcohol tax regime. Higher duty rates mean people buy less which results in reduced income to the Exchequer, businesses are being squeezed, and consumers have to pay more."
Hal Wilson, co-founder of Cambridge Wine Merchants, reflected on the burdens these changes have created, saying, "This feels like death by a thousand cuts, or even two thousand cuts..." pointing to the strain of calculating the precise ABV on thousands of different wines moving forward as another layer of complexity for the business.
Exchequer Secretary to the Treasury James Murray asserted the importance of pubs and brewers within the UK economy. He stated, "Our pubs and brewers are an integral part of the fabric of the UK and our brilliant high streets." He cited government measures aimed at fostering growth and stability within this sector.
Richard Naisby, chairman of the Society of Independent Brewers and Associates, remarked, "The Government’s increased investment...will help small breweries to compete and grow their businesses." He expressed optimism about the continued support for draught production amid these turbulent times. While consumers might enjoy minor savings at the moment, they should prepare for possibly greater impacts as other taxes and economic conditions develop.