A new government report has revealed for the first time the scale of the illicit wine market in the UK.

HMRC’s ‘measuring tax gaps 2013’ estimates that in 2011-12 alone the revenue losses associated with wine fraud was between £350m to £700m, with as many as one in 16 of the bottles of wine sold on UK shelves illicit.

Industry leaders have called for a major crackdown by the HMRC and the UK Border Force to tackle the organisations behind the trade and claimed UK tax policies may be adding to the scale of the problem.

“Fraud is an area of great concern to our members,” said Miles Beale, chief executive of the Wine and Spirit Trade Association.

“Not only does fraud undermine the competitiveness of legitimate businesses, it costs the government and taxpayers’ vital revenue.”

He said the WSTA would be calling for talks with the government to discuss the figures and the reasons for fraud, including the impact of the alcohol duty escalator, which some claim has forced more businesses underground.

Beale said the WSTA would be calling for “solutions that support the legitimate trade.”

FWD chief executive James Bielby said: “Today’s figures confirm what our members have known for some time, which is that the supply of wine in the UK is out of control. Criminal operators have been allowed to set up and thrive in direct competition with law-abiding wholesalers.

“By evading duty, criminals can sell wine at more than a pound a bottle below the best market price. Margins in the wholesale trade are slim and that differential is unfortunately very appealing to retailers who may not realise they are buying illegal stock.”

Bielby added: “HMRC has previously said it cannot act on this issue without an official measure of the loss to the public purse. These new figures provide that measure, and we expect HMRC and the Border Force to take swift and effective action to put the rogue supply chain out of business, such as our proposal for a rigorous registration scheme for alcohol wholesalers.”

The government figures also show continuing booming sales in illicit tobacco, estimating that 500 million more cigarettes were smuggled into the UK in 2012-13 than in 2011-12, and 300 more tonnes of hand rolling tobacco (HRT). The potential cost to the government was estimated at almost £3bn, half a billion more than last year.

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