UK: Planned reform of alcohol taxes could pose threat to craft brewers and artisanal spirit makers

Rishi Sunak’s planned reform of alcohol taxes would pose a threat to craft brewers and artisanal spirit makers while reducing choice for consumers, drinks industry figures have warned.

The chancellor announced a sweeping overhaul in this week’s budget, under which alcohol duty will increase in line with alcohol content from 2023. Draught beer will also be granted a tax break to help struggling pubs.

While the proposals have met with approval from trade bodies and some pub and drinks companies, smaller businesses warned that the plans would stifle innovation and favour large corporations.

Craft brewers said unusual but much-loved styles such as imperial stouts or double IPAs might become economically unviable under plans to levy a higher rate of tax on beers above 8.5% alcohol by volume (ABV).

“We release our My Continuous Improvement imperial stout once a month as a bit of a treat,” said Paul Jones, the co-founder of the Cloudwater brewery in Manchester.

“Customers love it but they drink it in moderation. At 11% [ABV], we don’t know whether we’ll be able to continue making it. The cost of production would go up by around 35%.”

Sam McMeekin, who runs Gipsy Hill Brewing in south-east London, said: “It will effectively strip out anything above 8.5% because it’ll become unviable. A double IPA at 9% is not really going to happen.”

In his budget speech, Sunak said that increasing duty in line with alcohol content would make for a “healthier” taxation system.

But the boss of gin maker The House of Botanicals said that heavy drinkers were more likely to be attracted to the least expensive, mass-market brands, which typically have lower alcohol content than artisanal alternatives, rendering them cheaper to make.

“All the award-winning gins over the past few years tend to be 43% and above because they carry more flavour,” said the company’s founder-director Adam Elan-Elmegirab.

“There’s no kids bouncing around drinking my Old Tom gin.”

“You’re only hitting the smaller brands, not affecting the ones that do cause the issues.”

Brewers have also voiced concern about Sunak’s “draught relief” policy, which would shave five percentage points off duty on draught beer.

Early plans, which are still open for consultation, suggest the relief would only apply to beer sold in containers of more than 40 litres.

Larger brewers typically sell in such volumes, while start-up craft brewers tend to sell in 20-litre or 30-litre kegs.

Earlier this week, beer industry figures said Sunak and the prime minister had made a “gaffe” by staging a photoshoot at a south London brewery, holding kegs that wouldn’t qualify for the tax break.

McMeekin said that unless the craft beer trade body Siba succeeds in lobbying for a reduction, the break would apply to less than a quarter of Gipsy Hill’s output, while global corporations would reap the full benefit.

Jones said anything over 20 litres would still hurt small brewers, as well as deterring them from producing one-off small-batch brews.

A spokesperson for the Treasury said: “We are overhauling the UK’s outdated alcohol duty rules to undertake the biggest simplification for over 140 years.

“We have adopted a common-sense approach whereby, from February 2023, drinks will be taxed in accordance to their strength, which helps tackle problems caused by cheap high-strength drinks and puts the taxation of stronger beers, wines and spirits on an equal footing for the first time ever.”

The spokesperson also pointed out that small brewers can get up to 50% off their duty bills thanks to the small brewers relief scheme, introduced by Gordon Brown in 2002. The tax relief system is currently under review.

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