Gov’s new tax hikes will cost sector an extra £225m per year

The British Beer & Pub Association (BBPA) said while it agrees a reform of the duty taxation system is long overdue, the latest rises will cost brewers and pubs an extra £225m per year from now on.

Meanwhile, Northern Ireland industry association Hospitality Ulster’s chief executive Colin Neill has urged pubs to make sure their customers are aware any resulting price rises to them are directly attributed to the Government and not operators.

BBPA chief executive Emma McClarkin said: “Our duty system was long-overdue reform, to better incentivise the production of lower-strength products and nudge consumers towards them. This is a very welcome change for our industry which will help to generate even more variety and greater innovation in our sector, as is the freeze for draught beer to support pubs.

“But brewers don’t just supply draught products, they package beer in bottles and cans for enjoyment in pubs and at home as well, so the 10.1% duty increase will have a huge impact, and overall will likely lead to costs going up across the whole category.

“This will be on top of the enormous price hikes they’ve faced on energy, barley, wheat and other key commodities across their supply chains over the past two years. The cost of consumer goods have risen on average by 24% in that period, but brewers have worked hard to keep the impact of disrupted supply chains and cost increases to customers at a minimum, with average cost of beer increasing by just half that, at 12% because the last thing they want to do is price people out of enjoying their favourite drinks.  

“We need the Government to guarantee there will be no further increases to duty in the coming months, because there is only so long our brewers and the pubs they supply, can continue to shield customers from these rising costs so that a pint at the local remains affordable for everyone.”

Tax will be 30% of total cost​

The BBPA explained brewers will pay 10.1% more tax on bottles and cans of beer, meaning tax will make up around 30% of the cost of a 500ml bottle.

At the same time, duty paid on draught beer in pubs will be frozen but the tax increase on packaged beer is set to have an impact on both breweries and pubs.

The changes, which are being introduced as part of wider reforms announced in 2021, simplify the regime so that duty paid on all alcoholic drinks is relative to their strength (ABV).

The move is part of the Government’s plan to incentivise the production of lower-strength alcoholic drinks, with products qualifying for the new lower rate of duty now being anything less than 3.5% up from 2.8% in the previous system.

Hospitality Ulster’s Neill said: “The immediate future remains challenging, and it is vital that we ensure our valued customers understand the price increases are down to the Government – not hospitality businesses.

“This has left hospitality businesses – that are fighting to break even - no choice but to pass on the significant duty increases to customers. This is heaping misery on customers and will damage hospitality businesses at the same time.”

He explained that rather than helping businesses, the Government is exacerbating the sector’s struggle by loading inflationary pressures on businesses that are also grappling with soaring electricity costs, labour shortages and a cost-of-living crisis.

The breakdown of a price of a pint showed a publican is only making about 50p on a pint, Neill said, and added: “That’s just not sustainable at a time when costs are rising all around us.

“The hospitality sector is one of the highest taxed and undervalued sectors in the UK, but we will continue to work in partnership with UKHospitality to press the British government to recognise the importance of the industry.”

Help for 38k pubs

According to the Government, the new legislation will mean tax paid on pints and other drinks on tap in more than 38,000 UK pubs is now up to 11p cheaper than their supermarket equivalents and the new Brexit Pubs Guarantee “will keep it this way for good”.

It said the key changes are:

• All products taxed in line with alcohol by volume (ABV) strength, rather than different duty structures for different drinks
• Fewer main duty rates, from 15 to 6, to make it easier for businesses to grow and operate
• There will be lower taxes on lower alcohol products – those below 3.5% alcohol by volume (ABV) in strength – a huge growth area in the drinks industry
• All drinks above 8.5% ABV will pay the same rate regardless of product type

However, the Night-Time Industries Association (NTIA) said the implementation of the planned alcohol duty increase “threatens to inflict severe damage on an already struggling industry that plays a crucial role in our nation’s economy and cultural vitality”.

NTIA CEO Michael Kill said: “The recent actions taken by decision-makers to implement the biggest single increase in alcohol duty in almost 50 years, coupled with the wilful withdrawal of support and the imposition of already excessive taxes, have ignited anger and frustration across the night time economy sector.

“From the withdrawal of non-domestic energy support to changes in the late-night levy, the withdrawal of regulatory easements and now the biggest increase in alcohol duty for several decades, the consequences of these decisions are becoming increasingly burdensome.

“As a sector that has stood resilient in the face of unprecedented challenges, we cannot help but feel neglected by the very authorities we have supported during the pandemic crisis. The speed with which we seem to be forgotten is disheartening, especially given the pivotal role our businesses play in driving economic growth and fostering vibrant communities.

“We are not asking for special treatment but simply for fair consideration, understanding and support as we navigate the road to recovery.”

Meanwhile, mead brewer Gosnells was crowing about a reduction is duty on a pint means customers will pay 43p rather than 52p of the honey-based beverage on draught.

Gosnells founder Tom Gosnell said its drinks are classed in the ‘made wine’ category so the new duty reform is a “boon”

He said: “Gone are the days of us being stuck in the rigid structure of the previous regime, whereby a mead was taxed the same at 6% and 15%, effectively making anything at circa 8% commercially difficult (as unfortunately, consumers align ABV with what something should cost).

“As duty will now increase proportionally with ABV, we are free to experiment and innovate across a range of strengths, better reflecting the drinks we’d want to produce.”