Major prices hikes for wine drinkers, as VAT rises to 20% for the industry

By James Bayley

Published: 01 April, 2022

In a sector facing soaring costs and plummeting consumer confidence, today’s increase in VAT gives operators a tough decision to make on price rises.

VAT in hospitality rises from 12.5% to 20% today (1 April 2022), at a time when cost inflation for the sector is at 18%.

Recent business surveys show the hospitality industry is facing a 95% hike in energy bills, 19% in labour costs, and a 14% rise in drink prices.

UKHospitality CEO Kate Nicholls said: “Given the unfolding cost-of-living crisis for consumers and soaring operating costs for businesses the return to 20% VAT for the sector will prove nothing less than catastrophic.

“The now inevitable price rises for consumers will dampen demand and many hospitality businesses – one in three having less than a month of cash reserves and most are carrying heavy debt burdens – will fail as a result.”

Meanwhile, the WSTA has warned that ‘punishing’ new tax rates will hit UK businesses and consumers at a time when the UK is already battling a cost-of-living crisis.

The plans for alcohol duty reform are due to come into effect in February 2023, and look to tax alcohol by degree – a change which will introduce 27 bands for alcohol across categories, thus adding to the inflationary pot for the wine sector.

Miles Beale, chief executive of the WSTA, said: “If all alcoholic drinks are to be taxed according to the alcohol content, it is fundamentally not fair that wine and spirits are set to pay three times the rate proposed for cider and 50% more than the rate proposed for beer.

“Likewise small producers in our sector should not be left out because they produce wine and spirits, rather than beer or cider.”

Daniel Lambert, MD of Daniel Lambert Wines also fears for small businesses. During yesterday’s UK Trade and Business Commission Lambert said: “Businesses are being strangled to death [by Brexit]. Many, many small wine shops will cease to trade because it’s simply not affordable to do it anymore.”

The UK is currently the world’s largest spirit exporter and a global hub for wine, with Britain the second-largest importer of wine in the world.

On import checks Lambert added: “Prices are already up by 20p-40p on wine, working out at roughly £1-£1.10 extra per bottle for the consumer.

“Choice is going to be reduced dramatically in the UK market.”

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