Comment - UK Budget is the calm before the storm
'As you were' for the drinks sector
Drinks makers cheered a reprieve from the UK Government in yesterday's Emergency Budget, but the real battle still lies ahead.
A tax freeze is the best that wine, beer and spirits producers could have hoped for in yesterday's (22 June) Budget. And a tax freeze is what the Coalition Government duly served up.
Just as well, seeing as value added tax is to rise from 17.5% to 20% in January 2011 and the 5% above inflation rise on drinks duty tax announced by the previous Government in March is set to remain.
Cider makers have more reason to cheer than most after the Conservative Party - now the dominant Coalition partner - made good on its pledge to reverse a 10% above inflation increase left in the pipelines by the previous administration.
That, unfortunately, is where the good news dries up for now.
We must now await the Government's review of drinks pricing and taxation, which is due to be published later in the year and is assessing a range of measures that could be taken on alcohol sales.
While the Government appears to have no stomach for minimum pricing, it has expressed its support for some form of ban on below cost selling, an "overhaul" of the current licensing regime and an open mind on duty tax. There has been no talk of scrapping the previous Government's duty tax escalator, which projects above inflation rises for the next four years.
On a macroeconomic level, there is every possibility that unemployment will rise as the Government gets to grip with the nation's deficit.
For now, it's a case of 'as you were' for the drinks industry, but for how much longer?
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