UK BUDGET Wine industry 'very disappointed' at 7 pence on sparkling wine UPDATE

UK BUDGET Wine industry 'very disappointed' at 7 pence on sparkling wine UPDATE

	Published : Wed, 21 Mar 2007 17:45 By : Agencies Print this Story

(adds comment on beer and cider)

LONDON (AFX) - The wine industry has hit out at the Chancellor's decision to increase duty on sparkling wine by 7 pence a bottle, widening the gulf once more between still wine and sparkling wine duties.

Jeremy Beadles, chief executive of the Wine & Spirit Trade Association, said the trade body is have ry disappointed' with the 7 pence increase on sparkling wine.

'This was already an anomalous tax on the grounds that there is no reason why sparkling wine should be taxed at a higher rate than still wine,' said Beadles.

He called the increase a have ry unpleasant surprise' for the burgeoning domestic wine industry, for which sparkling wine accounts for 15 pct of output.

'When you are trying to grow a domestic wine market, as they are for English and Welsh wine, increases of this nature are extremely unhelpful,' he said, adding the increase would also negatively impact lower priced sparkling wines, including Cava and New World offerings.

'They are competing with still wines and they are not being treated in an equitable way,' he said.

Beadles also criticised the decision to put an inflationary 5 pence duty increase on still wine.

'It's a shame we are still getting these inflationary increases in the wine market when the market is incredibly tight,' he said, highlighting flat light wine sales growth in 2006.

The Chancellor increased duty on cider by one pence a litre, provoking a mixed response from the National Association of Cider Makers.

A spokesman for the trade association indicated the duty increase would slow the growth of cider, but said: 'We hope it won't stall or reverse it.'

However, he added: 'One pleasing thing is that they have broadly preserved the relationship between beer and cider, which gives [cider makers] a relatively stable market in which to operate.'

The Chancellor increased duty on beer by 1 pence a pint, a move described by a spokesman for the Beer & Pub Association as a 'slap in the face' for the British brewing industry.

'Gordon Brown has chosen to turn his back on a brewing sector facing intense pressure from rapid cost inflation and the forthcoming smoking ban,' he said.

The BPA had been calling for a freeze in beer duties ahead of this year's introduction of smoking bans in England, Wales and Northern Ireland, citing downturns in beer sales in Scotland and Ireland of 6 pct and 7 pct respectively.

However, a spokesman for Scottish & Newcastle PLC with around 27 pct of the UK beer and cider market, cautiously welcomed the increases in duty.

'We can live with a penny on a pint,' he said, adding the company would be passing on the cost to its customers.

He said the lower increase of 1 pence a litre on cider represented some recognition for the influence of apple growers on the regional economy.

The spirits industry welcomed the Chancellor's decision to freeze spirits duty for the tenth year running.

In an interview with Sky News, Tim Rycroft, government affairs director for Diageo PLC, the world's leading drinks producer, said the company was 'delighted' with the freeze in spirits duty.

The producer of Johnnie Walker Scotch Whisky and Smirnoff vodka recently unveiled a 100 mln stg investment in its Scotch whisky business, to include the construction of brand new distillery in Speyside, as a sign of its confidence in the potential for growth in premium Scotch.

'In this context, what is good for Scotch is not only good for Scotland, but for all of the UK,' said Rycroft.

Gavin Hewitt, chief executive for the Scotch Whisky Association, also welcomed the move at a time when the industry is looking to drive sales internationally, particularly in China and in other emerging markets in the Asia-Pacific region.

'Excise duty stability is supporting industry competitiveness in the home market, as it looks to continue to grow overseas,' he said.

Rycroft also said the drinks industry is facing up to its obligations to tackle binge-drinking in the UK.

'The industry is working with government in a range of different ways not to do with taxation to promote responsible drinking and to get people to move away from a binge-drinking culture,' he said.

The duty increases come into effect from Monday, March 26.

simon.meads@thomson.com

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