Budget Announcement Sparks Controversy in the Brewing Industry
In a surprising turn of events during the recent Budget announcement, the Chancellor unveiled a change to alcohol duty that has left many in the brewing industry feeling disheartened. Rachel Reeves, the Chancellor, declared a 1.7% cut in the duty on draught beer, suggesting that this would translate to a “penny off the pints at the pubs.” However, the response from local breweries, particularly Davenports Brewery in the West Midlands, has been one of disappointment and skepticism.
A Historic Brewery’s Reaction
Davenports Brewery, a staple in the brewing landscape since the 19th century, voiced its concerns through Brand Manager Harry Higgs. He expressed that while any decrease in duty is welcome, the 1p reduction is insufficient to alleviate the financial pressures faced by breweries and their customers. Higgs lamented, “For 195 years, Davenport’s has been known as the beer with lots of cheer, unfortunately, after today’s budget, there’s not much for us or our customers to cheer about.”
The brewery has been grappling with rising costs, including electricity, grain, and employment, which have all surged due to inflation. Higgs pointed out that the minimal reduction in duty would not significantly impact consumer behavior or encourage a shift from wine to beer, especially given the recent increases in wine taxation.
The Broader Economic Context
The backdrop to this announcement is a troubling trend for the alcohol industry. From September 2023 to August 2024, alcohol duty revenue fell to £11.8 billion, down from £13.1 billion the previous year. Spirits, in particular, saw a dramatic £750 million drop in revenue, while beer experienced a £320 million decline. This decline raises questions about the sustainability of the industry and the effectiveness of current government policies.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, described the Chancellor’s decision to increase alcohol duty as “a real kick in the teeth” for both businesses and consumers. He criticized the government for raising duties while claiming to protect income, arguing that such increases historically lead to price hikes, decreased sales, and ultimately lower tax receipts for the Treasury.
Business Rates Relief: A Mixed Bag
In addition to the alcohol duty changes, Reeves announced a 40% relief on business rates for the retail, hospitality, and leisure sectors starting in 2025/26. While this measure has been recognized as a positive step, it has not fully alleviated the concerns of industry leaders. Higgs noted that more substantial reforms are needed to create a level playing field with supermarket pricing, which continues to challenge small businesses in the hospitality sector.
Emma McClarkin, CEO of the British Beer and Pub Association, echoed these sentiments, stating that while the budget acknowledged the industry, it fell short of delivering the necessary reforms to stimulate growth. She warned that the cumulative impact of the budget could lead to a £500 million increase in operational costs for the sector, jeopardizing pubs, brewers, and jobs.
Looking Ahead: The Need for Comprehensive Support
As the brewing industry grapples with these changes, the need for comprehensive support and reform is clearer than ever. Industry leaders are calling for a more strategic approach that addresses the unique challenges faced by small and medium-sized enterprises (SMEs) in the hospitality sector. The hope is that the government will take heed of these concerns and implement measures that not only support the industry but also foster growth and investment.
In conclusion, while the Chancellor’s announcement of a cut in draught beer duty may seem like a small victory, the broader implications for the brewing industry are far more complex. With rising costs and declining revenues, the path forward will require careful consideration and decisive action from policymakers to ensure the sustainability of this cherished sector. As Harry Higgs aptly put it, “If she wants to make more of an impact and really help us out as a hospitality industry, I would personally like to see something that would have helped the level playing field with the supermarket pricing, rather than just taking a penny off.”