UK: Wine industry attacks duty hike on fizz

The UK's Wine & Spirit Trade Association has slammed the UK Chancellor's decision to hike duty on sparkling wine.

Chief executive Jeremy Beadles told just-drinks today (21 March) that he was "deeply disappointed" by UK Chancellor Gordon Brown's decision to increase the duty on sparkling wine by 7p (US$0.14).

"We have been seriously taken by surprise. Our understanding is that the Treasury recognised that to tax a product just because it has bubbles in it is an anomaly," Beadles said. "This just serves to widen the gap between still and sparkling wines."

The Chancellor announced a 5p increase in the duty on still wine, in line with inflation in the UK.

Beadles said the higher duty level on sparkling wine harks back to the Napoleonic wars, when the UK would levy taxes on Champagne to finance the rebuilding of the British Navy.

He said: "Now, the category is more than just Champagne. Now only 40% of sales are from Champagne. Lots of the Cava and New World sparkling wines seek to compete head on with still wines."

The UK remains a tough market for the world's wine producers with the off-trade in particular driven by fierce price competition. Beadles said the hike in duty on sparkling wine would hit the bottom line of suppliers.

Beadles said: "The UK will be a much less attractive market to supply into. With declining margins and profits, suppliers are likely to stock elsewhere, which would lead to reduced choice and quality for consumers."

Beadles, however, echoed the UK spirits industry's satisfaction at the Chancellor's decision to freeze the duty on spirits.

Elsewhere, the Chancellor announced that the tax on beer and cider will rise by 1p, also in line with inflation.