Times are tough, money is tight. Nobody actually wants a recession. However when businesses and retailers are feeling the pinch there are always some bargains to be had. We’ve seen discounts of 75% common place over the last 12 months – mainly on items that are hugely over inflated in the first place like kitchens and sofas, but it means you can get a good deal at last. The Bank of England base rate is at an all time low of 0.5% and VAT has been temporarily cut to 15%, all to try and get the nation spending again.
So most items are cheaper now than they’ve been for quite some time – but not wine! Why not? Well, let’s start with 36 pence duty increase over the last 18 months – with VAT chargable on this increase. But that’s just on still wine under 15%abv. Anything fizzy has been hammered even harder, and any higher alcohol wines like Amarone are subject to higher duty rates! Let’s not forget the Houses of Parliament have the only bars in the UK that are exempt from VAT, and they have a wonderful wine cellar of all the best wines funded by us the taxpayer!
But that’s only a part of the problem. The other reason wine prices have shot up is the pound has lost 25% of it’s value over major foreign currencies. Today it was right down to 1.06 Euro, and fears are that it will reach 1:1 very shortly. This would be absolute disaster for the UK wine trade. 18 months ago the pound traded at 1.40 Euros.
Put this into perspective!
If a wine cost a UK importer 4 Euros 18 months ago, it translated to £2.85 plus £1.24 duty, plus 72p VAT which was £4.81 per bottle – the importer and retailer then have to add their margin.
Today (or very shortly) that 4 Euros would be £4, plus £1.60 duty, plus 84p VAT which is £6.44, an icrease of 34%. With transport and the importer and retailer margins – with VAT added – that wine would retail at £9.99 probably more in a traditional wine shop.
So we know why prices have increased.
What should I do to keep the cost of my wine down?
Well, there’s still time to make some canny savings but it’s difficult to commit to spending when all your instincts are telling you to save. But more price increases are on their way so if you buy now you will save money. The pound is likely to continue to weaken at least till a general election when we can have a change of government and start rebuilding the economy. But that will not be an overnight recovery so the pound is likely to stay weak for a couple of years. However the wine trade works 4 months behind the pound! Importers will have agreed a price on the wine they’ve imported and no doubt have a Euro bank account to pay for it. It’s their next shipment of wine that’s likely to cost them an extra 10% which will be 20% by the time it filters down to the consumer. So leap in now and buy if you can spare the money! Remember this government is planning on increasing VAT in January – they say back to 17.5% but I can’t see that personally. The whole exercise of reducing VAT to 15% cost Uk business more than it saved – they were already discounting 75%, so what real difference is an extra 2.5% going to make? No, I beleive this was a smokescreen so the Government can raise VAT to 18.5% or even 20% knowing how brassic they are! This will also put the price of your wine up!
My advice is buy now – because prices WILL increase!