UK brewers and pubs are preparing for cost increases from Tuesday 1st August as beer duty will reach the highest level it has ever been.
From Tuesday this week brewers will pay 10.1% more tax on bottles and cans of beer, meaning tax will make up around 30% of the cost of a 500ml bottle.
At the same time, duty paid on draught beer in pubs will be frozen but the tax increase on packaged beer is set to have an impact on both breweries and pubs, adding an extra £225million of costs per year across the industry, at a time when businesses and consumers have already been battling high inflation for months on end.
The changes, which are being introduced as part of wider reforms announced in 2021, simplify the regime so that duty paid on all alcoholic drinks is relative to their strength (ABV).
The move is part of the Government's plan to incentivise the production of lower-strength alcoholic drinks, with products qualifying for the new lower rate of duty now being anything less than 3.5% up from 2.8% in the previous system.
The long-awaited introduction of this new system is a positive step forward, but with other cost increases showing no signs of let up and the overall rate rising due to inflationary pressures, pubs and brewers are pleading for Government to guarantee an end to price increases and stop further hikes to duty in the future.
Emma McClarkin, Chief Executive of the British Beer and Pub Association said:
"Our duty system was long-overdue reform, to better incentivise the production of lower-strength products and nudge consumers towards them. This is a very welcome change for our industry which will help to generate even more variety and greater innovation in our sector, as is the freeze for draught beer to support pubs.
"But brewers don't just supply draught products, they package beer in bottles and cans for enjoyment in pubs and at home as well, so the 10.1% duty increase will have a huge impact, and overall will likely lead to costs going up across the whole category.
"This will be on top of the enormous price hikes they've faced on energy, barley, wheat and other key commodities across their supply chains over the past two years. The cost of consumer goods have risen on average by 24% in that period, but brewers have worked hard to keep the impact of disrupted supply chains and cost increases to customers at a minimum, with average cost of beer increasing by just half that, at 12% because the last thing they want to do is price people out of enjoying their favourite drinks.
"We need the Government to guarantee there will be no further increases to duty in the coming months, because there is only so long our brewers and the pubs they supply, can continue to shield customers from these rising costs so that a pint at the local remains affordable for everyone."