The Chancellor has just announced a wide range of changes in one of the longest Budget statements seen in recent years. The sheer complexity of changes included in the statement will take time to review and better understand the full impacts for businesses. However, at first glance, there is little for the cider industry to cheer about.
UK Cider making has a unique business model. It is partly about making cider by fermenting apple juice to make alcohol, but when blended by a skilled cider maker, it is about marketing and selling a wonderful range of drinks, running a business that employs people and contributing to the local community. Cider makers also grow apples and work closely with local farmers to ensure that there is sufficient fruit to make their ciders, working together to harvest and mill the fruit to make the much-needed apple juice.
The Autumn Budget appears to have targeted each of these aspects of cider making in ways that will negatively impact the industry for years to come.
Alcohol duty was increased for packaged ciders by the higher rate of inflation figure from February next year. The cider industry had asked for a reduction in duty to reverse the hugely negative impacts from the 10.1% duty hike in August 2023. From February next year cider drinkers will see further increases to the cost of the ciders that they buy in bottles and cans, either in the pub or at home.
The Chancellor announced that excise duty on draught ciders would be reduced by 1.7% to better support the pub. Whilst this is welcomed, as 2/3rds of cider value sales come from the hospitality sector, it fails to recognise the huge amount of cider sold in bottles across UK pubs. In addition, the reduction in business rate relief for the hospitality sector will result in additional pressure on the pub sector, already in significant decline. The cider industry depends on a vibrant and healthy hospitality industry.
Cider makers are businesses and the increase in employer National Insurance, alongside such a significant cut to the threshold, is a bitter pill to swallow for producers. The pressure that this will add to profitability can only result in either higher prices for cider drinkers or reduced employment. With so many cider makers operating tourist attractions, providing tours, shops and restaurants, the increase in National Living Wage again puts pressure on the cost of doing business.
Finally, cider makers are often family businesses with their roots in agriculture. Many families started making cider decades ago, alongside the family farming operation. The decision to target these hard working families through inheritance tax, ensuring that the farm must shrink with each generation, puts farming, cider apple orchards and the wonderful UK cider industry at risk.
UK Cider Makers support more than 11,500 jobs, 15,500 acres of cider apples orchards, 300 farmers, and attract more than 1 million tourists each year. The category is valued at more than £3billion and contributes £34million to agriculture in farm gate value of cider apples. It is critically important that the government now looks to work with cider makers, farmers and the hospitality sector to understand how it can reverse the worst of these impacts and encourage growth and innovation.
