Trade Tuesday: Tipple to topple?

By Emily Chen & James Surallie

After a short taster over the Jubilee Bank Holiday, many Britons are now looking forward to warmer weather and (perhaps) making a trip to the pub garden a more regular occurrence for that glorious summer’s day drink.   

As consumers start to turn their attention away from hot cups of tea to refreshing cool drinks, SEC Newgate’s trade team take a deeper look into the UK’s favourite alcoholic summer beverages and how international trade affects them. 

Wine 

Many Britons choose a glass of wine as their go-to drink. According to Forbes, the UK was the largest importer of wine in 2020, bringing in 14.6 million hectolitres. Of the top importers, Australia was the second largest source of wine imports into the UK by volume and fourth largest by value, while the UK is Australia’s largest export market in volume terms.  

Following the signing of the UK-Australia Free Trade Agreement (FTA) earlier this year, antipodean wine producers are hoping that our trading relationship will improve even further with the removal of tariffs. However, domestic changes may throw a spanner in the works for the benefits the FTA was meant to create. In his autumn Budget, Chancellor Rishi Sunak announced his intention to reform alcohol duty, which he hoped would result in something “simpler, more economically rational and less administratively burdensome on business and HMRC”. Despite these good intentions, the changes could have a detrimental impact on the wine sector. In the context of the UK-Australia FTA, the tariff benefit of between approximately 11p and 20p per bottle of wine will be entirely negated by the duty proposals which would add 50p to a bottle for many higher strength wines.  

Given this, countries producing higher strength wines such as Australia, New Zealand and other New World wine producing countries – with whom the UK is seeking new trading relationships– will be adversely impacted, leaving British consumers paying a higher price.  

Beer 

Britain is well-known for its pubs, in which many a pint is poured. Beer was rated Britain’s top alcoholic drink in 2019, with 8.5 billion pints sold the previous year, and the BBC claiming that ‘lager is firmly lodged in British identity’.  However, the industry faces similar challenges to the wine industry. The UK has one of the highest rates of beer duty in the world (beer duty is the tax on producing and selling beer) which at the current rate is 12 times higher than that in Germany for example. On top of that due to COVID-19 and the global challenge of rising costs - alongside energy and supply shortages - the sector has been under significant strain both domestically as well as with regards to its export agenda.  

This year marks the close of the British Beer Export Strategy, an ambitious plan to achieve major export success for the British brewing industry; an industry which is already the sixth largest exporter of beer in the world, worth £8.9 billion to the UK economy, being the third-largest food and drink export from the UK (following Scotch whisky and chocolate).  The US is the largest importer of British beer, importing $6,626m in 2021. It would be unsurprising if this number were to be beaten this year. This is due to the closer UK-USA trading relationship (following the dropping of Trump era sanctions), and the months between May and August representing 40% of total beer sales in the US.   

However, with these pressures, the question of whether the UK can meet domestic, let alone export demand becomes more acute. Scottish wholesaler Dunns Food and Drinks warned that there may be shortages of bottled beers due to production costs rising by almost as much as 80%. Co-founder of Portobello craft brewer Steven Smith-Hay explained that we are paying 65 pence per bottle, a 15 pence increase from January 2022.  

The Society of Independent Brewers went so far as to respond to the Chancellor’s Spring Statement by saying that the “energy and supply crunch are an urgent and potentially devastating situation... with many [small brewers] unlikely to survive until the Autumn Budget”.  

While many businesses are calling for some sort of fiscal event to support businesses before the summer break, so far the Chancellor has stuck to the principles he set out in last autumn’s Budget, when he rejected the idea that the answer to every question should be to ask “what is the government going to do about it?”  

Well until we find out, we know what we’re going to do about it… have a drink in the sunshine while we can.