I’ve never been shy on speaking out – or perhaps moaning – when it comes to the state of the spirits industry. And as the Chancellor’s spring statement approahes, it feels like a good time to climb back aboard my soapbox to share my thoughts on what the announcement might hold for the tax-bashed spirits and hospitality industries.
After the autumn budget announced more duty rises on alcohol, a two-fold hike to National Insurance contributions, and more increases to the cost of doing business, my sincerest hopes are that the upcoming statement doesn’t deliver or even tease another punch to the gut.
A tricky global landscape
While the spring statement doesn’t promise as much detail as the more definite autumn budget, it exists to provide a mid-year update and certainty to markets and businesses.
I reckon that is especially important this year, with the threat of tariffs and other global factors affecting trade and the wider UK economy. If tariffs on UK spirits come into play, eventually consumers will see price hikes on supermarket shelves – despite brands’ and distributors’ best attempts to avoid exactly that. Let me explain.
If tariffs on American spirits come into play, it’s very unlikely that distributors or brands will be able to absorb that cost. At the moment we’re stocking up on our US products to see us through any short-term tariffs that might be put in place. If they remain for the long term, the cost will be passed on to UK customers.
If that price point rises, consumers will have a choice: to pay more, or drink something else. Obviously, this will present opportunities for similar brands, and we’ve seen success stories born out of being an alternative to brands who have raised their prices for whatever reason. With my optimist’s head on, I don’t think it will come to that – US spirits businesses are doing some incredible things, global markets are an important part of that success, and it would be crazy of the US government to penalise businesses like that.
The burden of bureaucracy
As well as various duties, tariffs, and taxes placed upon the UK spirits and hospitality industries, our legislative environment is a nightmare. And it’s about to get more complex – and costly – for our industries.
My hope is that the statement might announce a delay to the extended producer responsibility for packaging scheme. The scheme, which is set to kick off from 1 April this year, charges businesses for the amount of packaging they put into the market. But the fees and processes are still unclear – and at the very minimum, we all need more certainty. In February this year, various trade bodies including UKHospitality and the Wine & Spirit Trade Association wrote to government addressing their numerous concerns – but we still don’t know if the government’s listening.
I’m confident that the majority of the spirits and hospitality industries want to do the right thing when it comes to the environment. But the EPR scheme in its current form is going to drive more businesses back to single-use plastic which, given all that we know, is absolute madness.
Add into the mix that we also have the deposit return scheme expected in Scotland from 2027 and that’s a difficult regulatory environment for national businesses to navigate. It would be sensible for all governments to pause and talk to us – to get it right before they go ahead.
Hope versus reality
I can’t imagine the government will backtrack on any of the punitive measures it announced in October. If I was an optimist I’d like to hear suggestions of a freeze to alcohol duty, rate incentives for venues, caps on energy bills for businesses (and consumers), and maybe even a reduction in VAT. Any measures that put more cash in customers’ pockets are good for us, too.
But I’m a realist, so I’ll settle for no new curveballs or punitive policy changes. We took a quadruple hit at the last statement – it’s somebody else’s turn.
Still, no matter what is announced and what curveballs are thrown at us, it is my firm belief that we will weather the storm. We are seeing pockets of growth across the industry. And while it might not be substantial, it shows the buoyancy of the sector. We’re resilient, we’re entrepreneurial, and because of that we’re not going anywhere.
I’ve said before that when the UK looks after its hospitality industry, the country thrives. It drives employment, it gets people spending, and because we’re taxed so heavily, it lines the pockets of the government. We’ve been hammered over the past few years, but the winter’s over now, nights are lighter, and across the country there are pockets of success we can all learn a lot from.
I’d include our government in that statement – if only they’d open their eyes.
Nick Gillett is the MD at Mangrove Global
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