UK: Drinks industry facing mass job cuts, falling sales - study

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The UK alcoholic drinks sector is braced for up to 80,000 job cuts and falling sales over the next four years, a new report has warned, as industry leaders notch up the pressure on the government's proposed duty tax rises.

Alcoholic drinks sales are expected to fall by 3.7% in the tax year up to April 2009, costing an estimated 25,000 jobs across the sector, according to a report published today (25 February) by Oxford Economics.

Based on industry data and a deteriorating economic outlook, sales are expected to continue falling for the next four years, said the report, which was commissioned by trade associations representing beer, wine, cider and spirits sectors.

Drinks industry leaders intend to use the report to increase pressure on the Treasury to abandon its proposed "tax escalator" on alcohol, which is set to increase duty tax on drinks by 2% above inflation each year for the next four years.

Tax on wine, beer and cider rose by nearly 18% in 2008, while spirits tax increased by 13.5%. The beer, cider and wine industries, including international firms such as Constellation Brands, E&J Gallo and Heineken, have blamed this for directly contributing to poorer performance and job cuts in their UK businesses.

Between 75,000 and 80,000 jobs across the drinks industry are expected to be lost as a result of the economic climate, as well as the tax rises, Oxford Economics said.

"This figure could increase to as much as 120,000 if duty pass-through in the on-trade continues at rates calculated in our previous studies," it said. It estimates that 1.85m people are employed either directly or indirectly by the country's drinks trade.

Treasury revenue from excise duty and value added tax on drinks, meanwhile, is likely to slip by GBP175m by 2010/11 under current plans, the report added.

Figures from previous recessions suggest that the drinks sector as a whole is not immune to a weakening economy. Real consumer spending on alcohol fell by 9-10% in the UK recessions of the early 1980s and 1990s.    

Some categories are predicted to hold up better than others, however. Real consumer spending on wine is expected to return to growth, of 1.3% year-on-year, by 2010/2011, although beer, cider and spirits spend will continue falling until 2012/13.

The trade bodies which commissioned the Oxford Economics report have also joined forces to lobby the government over its proposed tax increase in this year's Budget. These are: the Wine & Spirit Trade Association, the British Beer and Pub Association, the Gin & Vodka Association, the Scotch Whisky Association and the National Association of Cider Makers.

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