Duties and taxes charged by the UK government are causing problems for the wine industry, taking a hit on the price of goods sold in the country, Ben Knollys, managing director at wine importer Hatch Mansfield has said.
Speaking to Just Drinks at London Wine Fair last week, Knollys said: “Unfortunately the new Labour government decided not to extend that [tax reprieve on wine producers]. It just stopped, which has made life very complicated.
“It has had a big impact in terms of the cost of goods. And then you have EPR and recycling coming in and that’s going to impact the price as well.”
The UK announced an interim system in 2023 for alcohol to be taxed incrementally based on strength – with lower taxes on lower-abv alcohol, and higher taxes on higher strengths, in what Knollys said was “the biggest duty increase in 50 years.”
Before August 2023, wine duty was predominantly charged according to volume, rather than how much alcohol the product contained.
Producers were given an 18-month reprieve from the graded alcohol system, during which time wines with an alcohol by volume (abv) of between 11.5% and 14.5% were all taxed as if their abv was 12.5%.
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By GlobalDataThe 18-month easement period ended in February and the change has been keenly felt by makers of still wine, where some 90% of products have seen tax increase under the shift to a graded system, according to the UK Wine and Spirit Trade Association (WSTA).
The Extended Producer Responsibility for Packaging (EPR) scheme came into force in April, meaning producers must report how much packaging they put into the market and pay associated rates per tonnage.
In March, UK drinks associations called for the government to address “significant” issues with Extended Producer Responsibility for Packaging (EPR) scheme, warning the scheme was “flawed”.
Knollys said the “massive impact of government legislation” was harming some vintners by making their products too dear.
The hit on price was particularly damaging to wine producers whose products are price sensitive. “Wine is massively price elastic, as price goes up, volume sold drops very quickly,” Knollys said.
He added that taxation on producers had become excessive, with the majority often going to government coffers instead of producers. He gave an example of a £7 bottle of wine “at 13.5% ABV and with an assumption of 11 or 12p per bottle for the new EPR tax.” That, he said, with all taxes calculated, could see 61% of the £7 go to the UK tax department.
Taxation wasn’t the sole problem affecting the UK wine industry, Knollys added. Another is oversupply of inexpensive products: “There is too much cheap wine is sloshing around where no one is making any money. It’s an unsustainable industry on many levels.”
