Pub operators warned that the chancellor’s scrapping of next year’s planned alcohol duty will do little to stem the tide of closures in the absence of targeted support for hospitality businesses.
Chancellor Kwasi Kwarteng told MPs on Friday: “At this difficult time we are not going to let alcohol duty rates rise in line with RPI,” an inflation measure.
Instead, Kwarteng said during his fiscal plan speech that planned duty rate increases for beer, cider, wine and spirits — set to take effect from February next year — would “all be cancelled”. The tax cut will cost the Treasury £610mn in lost revenues by 2026-27, according to official calculations.
But while industry bodies welcomed the alcohol duty freeze, they said businesses would still struggle during winter.
Kate Nicholls, UKHospitality chief executive, said the move “avoided loading the supply chain with further inflationary cost pressures” but she cautioned that it “doesn’t deliver meaningful support to many of the thousands of hospitality businesses which are struggling to identify how they will get through the next six months.”
Oliver Robinson, managing director of Robinsons brewery in Stockport, said he was “delighted” by the duty freeze but wanted further reductions in duty for draft beer, which he said was “still one of the highest across Europe”.
Nicholls added that the energy bill relief scheme alone was not enough to help hospitality businesses and that further measures, including a temporary VAT and business rates cut, would be needed “to sustain business and jobs viability in the sector”.
The hospitality industry has been hit not just by rising energy prices but soaring labour, food and drink costs in recent months. This week, the government announced it would cap electricity prices at £211 per MWh and gas prices at £75 per MWh for businesses for the next six months.
Emma McClarkin, British Beer and Pub Association chief executive, said the measures announced would give businesses “extra headroom” as they planned for winter. “This is going to be a lifeline for our sector throughout this winter,” she said, adding that she would have liked to the measures to have “gone further”.
In Friday’s mini-budget, the chancellor also announced that the differential duty rate for draught beer would now apply to kegs of 20 litres and above.
Barry Watts, head of policy at the Society of Independent Brewers, said it was “fantastic” that the government was including smaller kegs in the draught relief to help small brewers, but said he was “very disappointed” that this measure would only take effect from August instead of February.
“They could have really done with that boost now. It’s a really tough time,” he said. Some 160 of the UK’s small brewers closed at the height of the pandemic and another 40 to 60 this year, according to Watts.
Ministers will push ahead with reforming alcohol duty to a system based on the strength of each drink and will include wine in this scheme despite opposition from the industry, though a single transitional rate will be in place for wines of 11.5 per cent to 14.5 per cent alcohol until February 2025.
The wine sector previously said this would increase the prices of some wines by as much as 30 per cent. It would add “a costly administrative burden for UK wine businesses and consumers,” said Miles Beale, chief executive of the Wine and Spirits Trade Association.