Budget 2016

Food and drink firms give mixed response to budget

By Michelle Perrett

- Last updated on GMT

Food and drink manufacturers have given a mixed reception to the Chancellor's budget
Food and drink manufacturers have given a mixed reception to the Chancellor's budget

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Food and drink manufacturers are still coming to terms with the budget proposal to introduce a sugar tax on soft drinks, while welcoming business rates reform but expressing disappointment on the failure to cut alcohol duties.

Manufacturers were reeling from news of the soft drinks tax to fight child obesity would come into force in two years’ time.  Food and Drink Federation boss Ian Wright dismissed the sugar tax as “a piece of political theatre”.

Read more reaction to the £520M sugar tax plan, due to be levied in two years’ time,here​.

A warmer welcome was given to the doubling of the small business rate relief from 50% to 100%. Also, business rates will be increased by the consumer price index (CPI) rather than the retail price index (RPI) and fuel duty was frozen.

Beer and spirits

Alcohol duties on beer and spirits were frozen but duty on wine was increased.

The food and drink industry had asked the Chancellor to introduce policies to promote jobs and help businesses.

Ben Guy, md of Phoenix Group, a food manufacturer based in Nottinghamshire, said it was a budget for small businesses. 

“I was extremely pleased to see the chancellor announce rate relief for small businesses. Raising the lower-rate threshold to £15k and the higher-rate to £51k is a strong signal to British businesses to get on and deliver growth,”​ he said. 

“Corporate tax cuts for SMEs​ [small and medium-sized enterprises], paid for by tougher regulation for big business tax avoidance is undoubtedly a headline-grabbing move, but behind all the noise of the Commons this move goes some way to soften business challenges like the apprenticeship levy.”

‘Headline-grabbing move’

Alcohol duty has been an area that the drinks industry has campaigned heavily on before the budget. The chancellor announced a freeze in beer and spirits duty but gave the wine industry a blow with an inflationary increase.

British Beer & Pub Association chief executive Brigid Simmonds said: “We are still paying the second highest beer tax in the whole of Europe.

“This freeze means that beer duty is now 17% lower than it would have been, had the chancellor stuck with the escalator policy.”

But she raised concern about the impact on businesses of the National Living Wage, the apprenticeship levy and auto enrolment pensions.

The Wine and Spirit Trade Association (WSTA) said the increase in wine duty would have an impact on English wine producers and predicted the industry would struggle to invest.

“The government has missed this important opportunity to support the emerging English wine industry, which is a real home-grown success story that needs nurturing rather than being hit by another unfair tax increase,”​ said WSTA chief executive Miles Beale.

“The failure to rebalance this unfair tax burden on the wine industry will stifle the industry’s ability to invest, to sustain the 270,000 jobs it currently supports and to help British pubs, bars and restaurants where – at £4bn/year it makes a significant and fast growing contribution.”

Budget 2016: What the food and drink industry thinks

Heineken​, UK md David Forde: 

“We’re pleased that the chancellor will not be increasing beer and cider duty for the coming year. Whilst we would have liked to have seen a cut in these duties, it’s good news that we haven’t had an increase; which would have undone the positive effects of the cuts made in recent years.

“Furthermore, this tax freeze will not address the challenges apple farmers and cider-makers face. Cider making is a long-term investment that supports thousands of rural jobs and has the potential to be a real British success story.”

The Scotch Whisky Association​, chief executive, David Frost:

“We welcome the freeze in excise duty on spirits. We hope that this will sustain continued growth in the UK market for Scotch Whisky and thus help improve the public finances. But tax is still 76% of the price of an average bottle of Scotch and the majority of the British public think that is unfairly high.”


Confederation of British Industry (CBI)​, director-general, Carolyn Fairbairn:

“Businesses will welcome the chancellor’s permanent reforms to business rates – taking more small firms out of the regime and changing the uprating mechanism from RPI to CPI, which the CBI has long been calling for.

“Companies will be surprised to see no further measures to support innovation and R&D in this budget.  Manufacturers in particular will be looking for further details in the government’s upcoming National Innovation Plan.”

Campaign for Real Ale​, chief executive, Tim Page:

“A freeze in beer tax is an opportunity missed to back the continued revival of brewing in the UK. With UK drinkers paying the second highest rate of beer duty in Europe, a beer tax cut was needed to keep pubs open, boost the brewing sector and to keep the cost of a pint stable.”

Freight Transport Association​, md of policy and communications, James Hookham:

“A further freeze of duties is welcome but the chancellor missed a chance to give a boost to the stuttering economy by reducing the tax on an essential business input.”

 British Retail Consortium​, chief executive, Helen Dickinson:

“Taking small businesses out of the business rates system; switching the annual indexation to CPI and moving to more frequent revaluations are all welcome moves towards fundamentally reforming the business rates system.

“The plans for reforming business rates are still at odds with the government’s aspiration for a low tax economy.”

United Kingdom Warehousing Association​, ceo, Peter Ward

“The decision to freeze fuel duty will be warmly welcomed by UKWA members. It will reduce the cost pressures on UK supply chains and, it is to be hoped, stimulate further growth in the nation’s economy.

“By taking this action Mr Osborne has gone some way towards levelling a playing field that many people believe has been tilted against British logistics firms who compete with European operators whose lorries arrive in Britain filled with enough cheap fuel for a week’s work.”

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