UK Government set to ban drinks sales at below cost prices

UK Government set to ban drinks sales at 'below cost' prices

The UK Government is set announce a ban on the sale of alcoholic drinks below the sum total of duty tax and value added tax, according to reports.

The move will mean that lager could not be sold below GBP0.38 per 440ml can and vodka would have to cost at least GBP10.71 per litre, the BBC reported today (18 January).

Ministers announced last year that they would press ahead with plans to impose a defacto minimum price on drinks by banning sales at 'below cost' prices. Their definition of 'below cost' as merely duty plus VAT, if confirmed, will disappoint some in the on-trade and also health campaigners, who have been pushing for tougher action against discount deals in retailers.

Faced with some kind of action on pricing, other parts of the drinks sector have viewed a narrow definition of 'below cost' as the least worst option. It is not expected to impact the majority of drinks on sale in the UK, just-drinks understands from industry sources.

The Wine & Spirit Trade Association has consistently backed a ban on sales below the cost of duty plus VAT, as have a number of retailers, including the country's largest supermarket, Tesco.

The ban on below-cost sales is one of several measures that the Government is plotting in order to reduce excess drinking. Ministers have promised to "overhaul" the country's licensing laws and are also in discussions with drinks industry leaders on a "responsibility deal" that would include commitments from drinks companies on labelling and marketing.

Duty tax on beer, wine and spirits, meanwhile, is set to rise by another 2% above inflation in the 2011 Budget, to be announced in March.

This story has been updated, following the Government announcement. To view more industry reaction to this news, click here.