UK alcohol duty: Is it killing European wine producers?

Euronews

15 hours ago

In February 2025, the UK government updated their alcohol duty rates and ended a temporary concession on wine that had been in place since 1 August 2023.
The reprieve had been an 18-month-long move to help wine producers adjust to a new way of calculating alcohol duties. Namely, tariffs are now calculated by alcohol strength (ABV), rather than volume.
This could be seen as a gentle push for consumers to more closely consider the strength of what they're drinking, and it aligns with a wider, societal trend towards moderating consumption.
'This approach is supported by public health experts including clinical advisors to the Department of Health and Social Care,' HM Treasury told Euronews.
In 2024, the UK wine market, including fortified wine, was worth around £12.3 billion (€14.3bn), according to data from the Wine and Spirit Trade Association (WSTA). Although the UK does produce some wine domestically, it only accounts for around 1% of consumption by volume — roughly 12-15 million bottles per year. As such, the country relies heavily on imports to feed wine habits.
Just over five months after the end of the government's grace period, how is the new duty system affecting the alcohol industry in Europe? And what knock-on effect has it had on consumer pricing?
Are the UK's new rules affecting European wine producers?
The end of the reprieve in the UK has meant that wine with an alcohol strength of 11.5-14.5% ABV will no longer be charged one flat duty rate as if it were 12.5% ABV.
Whilst this means that the duty on 11.5-12.4% wine is cheaper, the duty on wines at 12.5-14.5% has increased.
Taking into account the Retail Price Index (RPI) uprating, a bottle of 13% wine now pays £2.88 (€3.34) in tax, 21p more than before 1 February. 13.5% wine pays £2.99 (€3.46), 32p more. The biggest rise is for 14.5% wine which now pays £3.21 (€3.72), 54p more than before the end of the grace period.
While this might not seem like a huge rise, it follows the key taxation change in August 2023, which saw 11.5-14.5% ABV wine pay 44p more tax, rising from £2.23 (€2.58) per bottle of still wine to £2.67 (€3.09).
Added to this, upcoming EPR charges — based on packaging weight — will add extra expense that cannot always be passed on to consumers.
Some suggest this change in duty is disproportionately affecting some producers, as their climates are more suited to certain wine styles.
'The hotter the climate, the higher the strength of the wine,' explained Stannard. Sunny climates produce grapes with more sugar, sugar ferments into alcohol and therefore the more sugar, the stronger the ABV.
For example, medium to low alcohol white wines in the 10-11.5% ABV category, such as Muscadet, Soave and Pinot Grigio often come from cooler regions like France, Northern Italy and Germany.
Wines with an ABV of 13.5-15% are those most affected by the end of the wine reprieve and typically come from warmer climates like Spain and southern Italy, as well as further afield, like Argentina, USA and Australia. This category includes wines such as Grenache (Garnacha), Shiraz (Syrah) and US Chardonnay. Some Californian reds have even become famous for being over 15% ABV.
The wineries themselves are not responsible for paying the alcohol duty; that falls to the importers. While it's too soon to have concrete data on producer sales, the long term effect is predicted to manifest in numerous ways.
Freddie Long, export manager at Spain's Long Wines, told Euronews that he expects a decrease in sales for high-alcohol Spanish red wines this year.
On the other hand, Jessica Marzo, Director at Italica, a specialist importer of Italian wines said: 'We expect the demand for Italian wines will remain the same as previous years. The demand in general has remained steady however we are expecting more sales of lower ABV wines in comparison to the higher.'
One UK-based wine seller told Euronews: 'European wines continue to be successful. Value [can be] found in Spanish, Portuguese and Italian wines, but South Africa still stands as better value.'
This continued value in Spanish, Portuguese and Italian wines is perhaps best explained by lower labour costs and therefore lower priced bottles to start with. Italy has no official minimum wage and the legal salary thresholds in both Spain and Portugal are significantly lower than France's monthly €1,767, at €1,323 and €957 respectively.
In South Africa, the minimum wage was set in March 2025 at R28.79 per hour (€1.39), which scaling up to a 40 hour week, totals around €240/ month.
How are the UK's new duty rates affecting customers?
Many importers stockpiled ahead of the 1 February change so much of the wine sold in the UK over the past few months will not have paid the increased duty rates. However, the impact on consumer habits may be visible in the year ahead.
'Within the Treasury, their modelling is a straight assumption that if you increase taxes by 3-4% there will be no impact on consumer behaviour so you can assume your revenue will go up by 3-4% too. There is plenty of evidence that that isn't true,' Stannard told Euronews.
It's at a retailer's discretion if they choose to absorb extra costs. If 100% of charges have been passed down to the customer, here's how they might be affecting your glass.
Hardly a bank-breaking increase, but if everyone in the supply chain adds a bit extra for profit, it may lead to much bigger price hikes.
Future of the wine industry
The US is the biggest importer of wine in the world by value. Germany is the largest by volume, closely followed by the UK which comes second in both measurements.
Australia, France and Italy are the UK's favourite wine producers, with Spain coming in fourth, by volume and by value.
In 2024, the UK imported 1.6 billion litres of wine. Much of that is imported in bulk, from new world producers like Australia, New Zealand and South Africa, bottled in the UK and redistributed. Around 20% of the bulk wine is re-exported in bottles to northern Europe.
For producers, the major concern is that globally there is an oversupply of wine, WSTA's Simon Stannard told Euronews. Consumption rates are declining and although production rates have dropped a little over the past few years, the supply is still outweighing the demand.
Reflecting on various trends impacting wine purchasing, Stannard added: 'Looking at the last 12 months, I think we'll see volume declines but whether those are any more significant than what is a relatively long-term trend [remains to be seen]. Value wise, overall value will be relatively static.'
Though not solely caused by changes in taxation, many large producers of all wines, across the world, are looking at how they can produce lower ABV products. This will take time and there are limitations on how much strength can be reduced. This nonetheless aligns with overall market trends as people seek to lower their alcohol consumption.
To support the demand for lower alcohol products, the industry is hoping for new reforms in the UK to match EU regulation on what can be labelled as wine. Currently products under a certain ABV must be labelled as a 'wine-based drink', according to UK regulation. This makes it less appealing for European producers as it requires them to produce bespoke packaging for the UK market.