Alcohol Duty Review Evaluation
The Alcohol Duty Review which began in October 2020 has brought significant changes in the taxation of alcoholic beverages in the UK. It allowed for the introduction of new, lower rates for lower strength alcoholic products, the introduction of a draught duty relief and measures to support small producers. This report analyses the implications of these changes since their implementation.
In August 2023, the rate of excise duty charged on lower strength alcohol drinks (defined as 1.3% to 3.4% ABV) was cut significantly relative to the rates charged on products with ABV’s of between 3.5% and 8.4% ABV. Although the excise rates on both strengths have subsequently been increased, both the HMRC and BBPA data suggests the differential has led to a significant increase in the share of less than 3.5% ABV beer sold. We estimate that these sales of lower strength rather than average strength beer have resulted in around 150 to 200 million units of alcohol being removed annually.
We have been unable to find any statistical evidence the draught duty relief changes introduced in August 2023 have had an impact on the beer sales and the future prospects for pubs at this point. This may reflect the excise difference is too small or any impact has been clouded by other factors driving rising costs of on-trade alcohol (such as minimum wage rises, NICs contribution changes and reduction in business rates support).
It is also too early to tell whether Small Producer Relief has increased the number of small producers in the wine and spirits industry. However, a similar scheme for beer has been in place since 2002, (albeit in a different form), with the number of breweries expanding substantially since then. As such, we expect that the scheme has helped improve the diversity and range of beers available to the consumer over the past two decades.
The experts behind the research
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Andy LoganDirector of Industry Consulting
Andy Logan leads our Consultancy offer on different industries for clients. He undertakes studies forecasting the demand for company’s products, analysing the drivers of different industries growth, and assessing the size of different markets and industries. He also investigates the competitive pressures and opportunities facing industries now and in the future. Another area, where he has a keen interest is in studies assessing the demand and supply of labour for different industries and occupations, identifying potential skill shortages and implications for migration.
He has worked with clients in most industries, and in many countries of the world.
Prior to joining Oxford Economics, Andy worked in a variety of economist roles at the Bank of England for 15 years. His research focused on the labour market, commodity and producer prices, UK trade flows, and the performance of UK banks. He holds an MSc. and BA. degrees from the universities of London and Leicester.
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Emily GladstoneLead Economist
Emily is a Senior Economist on the Industry team where she supports bespoke industry projects in areas such as renewable energy, construction and insurance. She is also involved in other projects like economic impact studies.
Prior to joining Oxford Economics, Emily worked for 5 years as a government economist for the UK Civil Service, working in the Department for International Trade (DIT) and the Department for Business, Energy and Industrial Strategy (BEIS). In DIT she worked on assessing the socio-economic impact of Free Trade Agreements (FTAs) and Freeports. She also worked in a crisis covid-19 analytical team, providing supply chain analysis and reporting of critical goods to ministers. In BEIS, she used economic analysis to develop policy positions for manufactured goods for both Free Trade Agreements, the Northern Ireland Protocol and the UK's Global Tariff Schedule. Emily holds a Bsc in Economics from the University of St Andrews.
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Sofia De MartinEconomist, Economic Impact
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