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United Kingdom: The brewers of UK are calling for a tax freeze on beer in the Budget this week and are urging the Chancellor of the Exchequer to support the beer industry, the British Beer & Pub Association (BBPA) communicated in its press release issued on March 14, 2005. In its Budget submission, BBPA has highlighted how the tax system is weighted unfairly against this popular, national drink.

“Beer and pubs contribute enormous value, both economic and social, to the UK,” said Mark Hastings, Director of Communications. “Beer is the nation’s drink of choice and needs a tax system that supports its competitiveness. However, under the current tax regime, beer is increasingly disadvantaged compared with wine.

“This has occurred because of the growing alcoholic strength of wine. Many of the most popular wines in the UK have an alcoholic strength of 13% or more. The amount of tax paid on beer relates directly to its alcoholic strength,” said Mr Hastings. “The stronger the beer, the more it is taxed. This is not the case with wine, which is taxed in bands so that strong wines pay the same tax as weaker wines. In effect, wine is taxed less compared to beer each year, costing HM Treasury up to £170 million per annum.”

“By standing up for beer, the Chancellor would also be supporting a home produced product. 90 per cent of beer sold in Britain is made in Britain, while 99 per cent of the wine sold in the UK is imported.

A study undertaken by Oxford Economic Forecasting (OEF) has also shown that the current beer duty rate is close to reaching its revenue-maximising level and that beer duty increases only raise one quarter of the revenue projected. This research strongly supports the case for stability in the tax regime, providing a boost for both Government tax revenue and the brewing sector.

BBPA is calling on the Chancellor to redress the balance and to give serious consideration to the tax treatment of beer compared to other alcoholic drinks. The industry is seeking a freeze on beer duty and an opportunity to investigate further, the impact of changes in beer duty on demand and the subsequent fiscal and business effects. “Taking into account the 18 brewery closures and the 1000 pubs that have called last orders in the past five years, a duty rise will place at risk more jobs in manufacturing, the supply chain and rural areas,” continued Mr Hastings. ”Contributing over £22 billion to the UK economy every year, the industry deserves an opportunity to plan with greater certainty and a level playing field in the drinks market.”

The British Beer and Pub Association is the UK’s leading organisation representing the brewing and pub sector. Its members account for 98% of the beer brewed in the UK and own more than half of Britain’s 60,000 pubs.
During 2004, BBPA commissioned Oxford Economic Forecasting (OEF) to undertake an econometric study into how duty rate changes actually impact on the beer market and government revenue. The study considered both the accuracy of HM Treasury’s ‘ready reckoner’ for the direct impact of a change in duty, taking into account the pass-through from duty increases to price increases. The main findings were: (i) The accuracy of the datasets currently used to model the beer market is questionable; (ii) On-trade beer sales have become more price sensitive; (ii) The pass through of duty increases to final on-trade beer prices is higher than one-to-one; and (iii) The Off-trade remains price sensitive, with the absorption of duty increases unlikely to continue.


Beer sales have declined by 16 % since 1979 to 2004. Beer duty has increased three times since 1995 by 9.9 %.

UK brewers use 40% of the malting barley crop and sustain hop farming in the UK. The sector supports around 1 million jobs, with more than 630,000 directly employed in brewing, distributions and the UKs pubs and bars. The average pub spends £75,000 in its local economy every year. Almost half (46%) of all alcohol consumed in the UK is beer. 28 million pints of beer are sold every day. The brewing and pub sector contributes over £22 billion to the UK economy – 2% of GDP. Excise duty and VAT account for one third of the retail price of beer. The UK is the only ‘high tax’ EU member to increase duty since 1992 by 28%.


16 March, 2005