There’s plenty of trouble stirring within the drinks industry at the moment. For a sector that has historically felt hard done to by successive governments, 2025 will test the resilience of all but the largest players within it.
Pubs and breweries have already been closing at an alarming rate, with a surprising amount listed in our end-of-year distressed business list for 2024. As such, the last thing the sector needed was further tax hikes to contend with, but that’s exactly where it finds itself. Unfortunately for the drinks industry, it’s far from the only issue its companies will need to tackle in the near future.
Existing issues yet to be resolved
While 2025 will introduce new problems for the drinks industry, there are already several issues that have been plaguing those in the sector for some time now. Chief among them are energy costs. With large premises and electricity-hungry equipment such as stills and fermenters to keep powered, distilleries and breweries can soon rack up significant energy bills.
On top of this, the rise in supplier costs has crippled businesses further. The Russian invasion of Ukraine has almost doubled the cost of some grains, while sugar prices have surged in the last year alone. Add all of these to plans by water companies to increase their prices by 35%, and a dangerous cocktail of price hikes emerges for drinks businesses.
New excise rates
After the former government raised excise duty by 10.1% in 2023, there was hope that the new government would bring in some measures that counteracted this and helped the sector.
The chancellor introduced cuts for draught beer that mean a reduction of a penny per pint for UK drinkers, but beyond that, the excise duty on other drinks has risen with inflation, making for some very unhappy manufacturers.
It was also hoped that the government would overturn their successors’ plans for a tiered taxation system based on ABV. The system, proposed by the Tories some time beforehand, will see the tax on drinks calculated individually, rising alongside the volume of alcohol present. This will see a bottle of 6.5% wine rise by 4p, while a bottle of 14.5% wine will shoot up by 54p.
It’s assumed that these rises will result in higher prices for the consumer, and potentially lower sales for manufacturers. Beyond that, though, it will almost certainly create a lot of extra paperwork and confusion too.
Employment costs
As widely reported, the changes to National Minimum Wage and National Insurance contributions could see some businesses paying significantly more after April. The drinks industry will likely see a hit too. If not in their own employment costs, then in the number of bars, pubs and restaurants that may close, shrinking their client pool.
Trump’s tariffs
Toward the end of his first tenure as US president, Donald Trump introduced trade tariffs on imports from a number of countries. This had a hugely damaging effect on Scottish whisky producers. As the 25% tariff came into play, the industry’s exports dropped by a similar amount.
Within the space of less than two years, the value of exports in Scotch alone dropped from £1billion to £729,000. Subsequent president, Joe Biden, suspended these damaging tariffs when he entered office, but that suspension is due to end in June 2026.
According to the Scotch Whisky Association, the industry is worth an annual £7.1billion to the UK economy. With the majority of its products being exported, such tariffs from the US could have a damaging and far-reaching effect.
Recycling
April will also bring with it new waste packaging recycling taxes. Part of the Extended Producer Responsibility policy, the changes will heap yet more costs onto beleaguered manufacturers.
Given the sheer amount of operating cost rises, it’s unlikely that these will be absorbed by many, and will instead mean even higher prices for consumers. These new fees will likely add around 11p to wine bottles and 17p to spirit bottles.
Worried about the year ahead?
It pays to get ahead of any problems you might foresee for your business. With the right preparation, you can ensure that you tackle any upcoming issues in the best way possible.
We have specialists on hand that can help you to facilitate turnaround strategies, sell your business, or even close your company depending on the best route available to you. Call us on 0800 975 0380, or email [email protected] for a free consultation.
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