A cocktail of higher taxes and recession is damaging wine sector growth in the UK and is threatening more job losses across the industry, figures from the Wine & Spirit Trade Association (WSTA) show.

A fall in consumer spending power and a 17% rise in duty tax on alcoholic drinks last year have damaged wine firms' profit margins and sales, the WSTA said in a statement today (24 February).

The trade body said: "In the wake of last year's Budget the amount of wine released from bond for sale - a good indication of what's actually being drunk by consumers - fell in the second quarter by over 5%. In the third quarter it was down by over 10%."

Two of the leading wine firms operating in the UK, Constellation Europe and E&J Gallo, have said they plan to cut up to 50 jobs each. Both directly blamed last year's duty tax rise for the move.

More widespread job losses can be expected after March, if the Treasury goes ahead with its plan to raise duty above inflation once more in this year's Budget, the WSTA has warned ministers in a briefing document, also seen by just-drinks.

The document cites Nielsen figures to show that year-on-year wine sales growth by value has fallen from just over 4% eight months ago to around 0.5% at the start of 2009. Volumes have gone from 3% growth to a year-on-year decline of nearly 2%.

The problem is even greater in the on-trade, with pubs, bars and restaurants reporting mid single-digit declines in the year to November 2008.

Supplier margins have also fallen into the red, a situation that is expected to get worse in 2009, the WSTA predicts in the document.

One on-trade supplier told just-drinks that it is not sure "how we are going to sell [our offering] to customers this year. The only good thing is that it will be hard for people to find a cheaper alternative."

Pernod Ricard said this month that its Jacob's Creek and Montana wine brands suffered "slight" and "modest" volume declines in the UK in the six months ended 31 December.

The wine and spirits giant told just-drinks that it "currently has no plans to cut jobs in the UK". However, a source familiar with the group told just-drinks before Christmas that weakening conditions in the UK in 2009 "might force" it to move resources and focus to more attractive markets.

Gallo said last week that UK sales for 2008 rose 0.4% by volume and 2.4% by value, but it warned of rising pressure from tax increases.