Tax Cuts for Alcohol Industry Face Backlash Over Insufficiency

The UK government has rolled out two tax relief measures aimed at boosting the alcohol sector, but critics argue they won’t be enough to counterbalance rising costs across the industry.

Labour plans to increase draught relief, reducing duty on draft pints by 1p, alongside a small producer relief scheme designed to support independent breweries and encourage innovation. The combined value of these reliefs is estimated at £85 million.

Exchequer Secretary to the Treasury, James Murray, stated that these measures will “increase sector growth” and “put more money in working people’s pockets.”

Richard Naisby, Chair of the Society of Independent Brewers and Associates (SIBA), welcomed the increased investment in draught relief, emphasizing its potential to support local pubs. “Draught beer sold in community pubs will now have a lower duty rate than supermarket beer, encouraging more people to visit their local,” he said. He also noted that expanding Small Producer Relief could help independent breweries grow and compete.

Struggles for Small Breweries

Despite these initiatives, small breweries continue to face financial strain due to rising operational costs and restrictive contracts imposed by large brewers, which often force pubs to buy exclusively from major brands.

While Brewdog, the UK’s largest independent craft brewery, accounted for nearly 15% of the total turnover in the UK brewing sector last year, many small breweries have been forced into insolvency at an alarming rate.

Critics Say Draught Relief Offers Little Help

Industry leaders, including the Wine and Spirit Trade Association (WSTA), argue that the draught relief changes will have little to no impact on the market.

“The government is using smoke and mirrors, distracting consumers with the idea of a penny off a pint,” said WSTA chief executive Miles Beale. “Draught relief won’t make a jot of difference to struggling publicans, who are facing the steepest duty increases on wine and spirits in almost 50 years.”

A key concern is the upcoming rise in Excise Duty on wines between 11.5% and 14.5% ABV, set to take effect on February 1. This duty adjustment, introduced under Rishi Sunak’s revised tax system last year but postponed, will shift from a flat rate of £2.67 per bottle to a scalable model that increases tax on stronger wines. As a result, the duty on a 14.5% ABV bottle will rise to £3.09.

“Make no mistake—there is no good news in these duty changes. Consumers won’t see any benefit at all,” Beale warned. “Prices are going up, no matter what you buy or where you buy from.”

Rising Costs Add to Industry Woes

The hospitality sector is also grappling with additional financial pressures, including increasing business rates tied to inflation and higher labor costs due to changes in the minimum wage and employer national insurance contributions.

Defending the policy, the government stated that draught relief “helps shore up public finances and supports the investment needed to grow the economy and fund public services.”

However, many within the industry remain skeptical, arguing that the measures fall short of the support needed to help businesses navigate ongoing financial challenges.