The drinks trade can expect a tough Budget this year, the Treasury has warned.
Officials from the Consumption, Analysis & Sectors team delivered that stark message to the Wine & Spirit Trade Association as it submitted its 2008 budget report.
Duty on alcohol is likely to increase above inflation, as the Treasury would consider "an inflationary increase in duty to be a freeze". "Any actual freeze in duty is seen in their eyes as a cut," added the WSTA in its January newsletter.
WSTA chief executive Jeremy Beadles insisted that the comments do not mean the Treasury has made a final decision. "I think they played a very straight bat, and there is some recognition that public finances are in a very tough position," he said.
Treasury officials said they would consider the association's arguments ahead of the Chancellor's Budget announcement in March.
The WSTA - which represents drinks suppliers and retailers from multinationals to independents - will continue to lobby for a duty freeze, Beadles said. In particular, the association will warn that a duty hike, along with cost pressure, could have a serious impact on the industry.
Suppliers and retailers fear significant duty hikes will have a devastating effect on the drinks sector, particularly in an economic downturn.
Steve Barton, joint director of First Cape-owner Brand Phoenix said: "If it's a chunky price hike, the fall-out in the industry will be enormous. A lot of smaller companies will not be able to cope."
Ian Bankier, chairman of specialist retailer The Whisky Shop, said duty increases were his main worry for the year ahead, and blamed supermarkets' pricing strategies for attracting the interest of the government.
Tesco's head of BWS Dan Jago said he hoped increases would be "measured and moderate" and said the WSTA had done an "outstanding job this year".
The Treasury warning comes as the latest figures show a downward trend in drinking in the UK. Office of National Statistics figures show the number of men drinking more than 21 units a week fell from 29 per cent in 2000 to 23 per cent in 2006. The number of women drinking more than 14 units fell by 5 per cent to 12 per cent in the same period.