Q&A: WSTA chief executive Miles Beale
What are the headline challenges for the spirits industry?
Firstly, taxation: Since 2008, the duty on spirits has increased by 44% and as a result duty now accounts for 77% of an average priced bottle of spirits. While the Chancellor’s decision to abolish the alcohol duty escalator and freeze spirits duty in the 2014 Budget was welcome relief, the industry is still being held-back by unfair duty treatment and a fairer tax regime is required.
Secondly, generating jobs: The UK is responsible for 18% of direct employment in the European spirits industry, the highest contribution of any member state; yet the UK has the fourth highest rate of spirits duty in the EU.
Thirdly: A continued focus on ensuring alcohol is sold, marketed and consumed responsibly to build on the good progress being made in this area.
How important are spirits sales to pubs?
Increasingly important. Research commissioned by the WSTA shows that spirits and RTD sales currently make up nearly a quarter of the value of drinks sold in pubs, while forecasts show that percentage is set to increase. The same research found that outlets increasing their spirits range have experienced an average uplift of 10.7% in spirits sales and over 5.5% in total sales.
Spirits are continuing to increase in popularity with an average of eight more spirits brands on the average bar since 2008, half of which come from the liqueurs and specialities range. Much of this growth is a result of increased sales of cocktails in the on-trade and a wider offering of premium drinks, helping to drive growth in the sector. And that’s why the Spirits Summit is a great opportunity to recognise and promote the category.
Why was the Call Time on Duty campaign successful?
The campaign combined organised lobbying by a broad and united coalition of industry players with grassroots, bottom-up campaigning by constituents through a dedicated campaign website, all united by the unfairness of the Government’s treatment of wine and spirits and its impact on pubs, consumers and the industry. The campaign also presented a strong economic case using independent research from Ernst & Young, which found that removing alcohol duty would create 6,000 new jobs and boost the public finances by £230m.
So, rather than costing the Government, the research showed that abolishing the duty escalator would actually boost the Government’s revenues, as well as creating jobs and economic growth. MPs of all parties as well as Ministers and Treasury officials were very receptive to a positive, well-evidenced case.
How has the industry responded since the Budget?
According to Budget forecasts, the removal of the duty escalator and freezing of spirits duty is expected to save the wine and spirit sector £175m in additional duty payments. A significant proportion of these savings will directly benefit the pub industry. The WSTA has commissioned further economic research to assess the impact of the spirits freeze, which we hope to publish early next year once data becomes available from the HMRC.
What more could the Government do?
Reducing costly regulation and compliance costs is one of the key areas where we would like to see the Government take further action. While duty is an obvious area, businesses in the on and off trade face considerable costs, from business rates to licensing fees. The WSTA is considering calling for a modest duty cut in the next Budget, which wouldn’t be unreasonable, given the fact that UK consumers currently pay almost 40% of all alcohol duty in Europe - more than France, Germany, Spain, Italy and Poland combined.
If the Government truly wants to support pubs, it needs to recognise that the nature of pubs is changing and that they are becoming more food-led, family-friendly venues with a far greater dependence on spirit sales.
What role can WSTA members play?
One of the most important actions WSTA members, or indeed any employee in the sector, can take is to develop and build a relationship with their local MP. An easy way to do that is for people to email their own MP through our revamped campaign website when it is launched later this year. The sector is an important employer and one which makes a significant contribution to local communities.
The wine and spirit industry directly supports the equivalent of 731 jobs in each constituency and economic activity worth £61.5m on average. It is a mistake to assume that MPs are always aware of these facts, which is why it is vital for all of us to engage with MPs and communicate the importance of the sector.
Miles Beale is a keynote speaker at the Spirits Summit on 21 October. Visit the Spirits Summit website for more information about the event.
