UK Budget leaves wine sector sour

By Chris Mercer

- Last updated on GMT

Related tags Wine Chardonnay Tax

The UK wine and spirits industry has said it is 'deeply
disappointed' by the UK chancellor's plans to raise duty tax on
wine, announced in his 2007 Budget Speech Wednesday.

Tax on sparkling wine will rise by seven pence per bottle, and five pence per bottle on still wine, chancellor Gordon Brown said.

The move sparked uproar in the drinks industry, which has complained UK tax on wine is already high and that the rise may hit incomes in a market where margins are increasingly tight.

Jeremy Beadles, head of the Wine and Spirit Trade Association (WSTA), described the announcement as a "startling U-turn", adding he was "shocked and deeply disappointed" at the hike on sparkling wine.

"This will have a serious impact particularly on the burgeoning English and Welsh wine market."

Sparkling accounts for 15 per cent of the UK's young wine sector, and various producers have won international awards, beating off established rivals from top wine countries.

Some producers from France's famed Champagne region have also looked to set up in southern England over the last couple of years, claiming the land is cheaper but very similar to their French homelands.

Beadles also attacked the UK chancellor's plan to raise duty on still wine.

"Although wine has been a growth category in the UK for several years now, the figures for 2006 show a considerable slowing in wine sales." Constellation Brands, the multinational wine group that owns Hardys and Stowells wines, has repeatedly warned that tough pricing in the UK wine market would hit its earnings this year.

Beadles said: "Combining high taxes with increasing costs means that the UK wine sector, which is already extremely competitive, risks becoming an unattractive market to suppliers resulting in reduced choice and quality for the consumer" .

Signals from producers, however, suggest the UK is likely to remain attractive to wine firms for now.

Several exhibitors at the France Under One Roof show, held in London last week, said the UK wine market was the most dynamic in the world.

On top of this, prices remain higher than some other European markets, such as Germany, where discounters have exerted more influence.

And the UK still has one of the fastest growing consumption rates in the world.

Elsewhere in the 2007 UK Budget, duty tax on cider rose as anticipated, but only by one pence per litre.

Related topics Manufacturers Beer & cider

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