News

High inflation for alcohol despite overall fall

15 November 2023 By James Evison

The levels of inflation for alcohol has remained stubbornly high despite the overall rate of inflation falling to the lowest levels since 2021.

The latest Office for National Statistics (ONS) data of the Consumer Price Index reveals a wildly varying picture of inflation. Some products and services have seen inflation drop significantly year-on-year, such as household services falling to its lowest level since the 1950s.

But alcohol, tobacco, food and non-alcoholic drinks remains in double digits and very high, even if the latter has fallen, as the impact of duty hikes and continued pressure on production costs and the supply chain shows little sign of easing pressures on drinks businesses.

The WSTA took to X/Twitter to highlight the change in inflation in the last quarter on alcohol, which clearly illustrated the alcoholic drinks sector was out of sync with other products and services in the UK economy.

Alcohol and tobacco remains unchanged at 11%; almost identical to October last year, and with no sign of easing on the back of potential new duty hikes.

The news comes as the wine and spirits industry is putting the government under pressure to not instigate a second duty hike in the Autumn Statement. This is following the big duty changes in August this year, which itself was one of the biggest shifts in how ABV was taxed for the industry in the post-war period.

The SWA and the WSTA have teamed up with many of the big beasts of the drinks industry to stop the duty hike by Chancellor Jeremy Hunt.

If implemented, it would raise the overall increase in wine duty to 30% since the summer alone, as well as potential double-digit impacts on spirits, beer and other categories, in one of the biggest short-term increase in prices ever seen in the post-war period.

Cost of living crisis

Speaking about the possible second duty hike, WSTA chief Miles Beale, said: “Consumers are still in the grip of a cost of living-of-living crisis and cannot afford to keep stretching their budgets just to be able to enjoy some of life’s little luxuries.

“Wine and spirit businesses need a breathing space to stay afloat in the current economic climate, which continues to combine lethargic growth with persistently high inflation.”

Beale argued that a further rise on top of the August hike “would make a mockery of the Government’s priority is to cut inflation as further prices rises will lead to reduced sales and less revenue to the Exchequer.”

The duty hike in August, and as confirmed by the ONS, produced one the biggest recorded rises in inflation.

“A second alcohol duty rise would be self-defeating and could prove the final nail in the coffin for some British drinks businesses,” Beale added.

Overall inflation

The news was better for the overall economy, and the hospitality trade. CEO of UK Hospitality, Kate Nicholls took to X/Twitter, highlighting the progress, and the “positive news” but urged the Chancellor to freeze rates.