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Italy’s prosecco makers say UK Budget tax break will put fizz into exports

Italian winemaker Giorgio Polegato opened a bottle of his own prosecco this week to celebrate a big boost to his business from a tax break — one announced not in Rome but in London.

Rishi Sunak, the chancellor in charge of the UK’s public finances, announced a sweeping overhaul of Britain’s complex system of taxes on alcohol, including the end of a premium duty on sparkling wines.

One of many fiscal gifts to British voters, it was also a helping hand from Boris Johnson’s pro-Brexit government to makers of Italian prosecco, Spanish cava or French champagne, whose products will become more competitive. Sunak said it would cut 87p from the cost of a typical bottle of prosecco.

Polegato, who has been running the family winery with his brother since 1987, hailed the announcement as further good news for a sector that was heavily challenged by Brexit and the pandemic shutdowns but is now enjoying an uptick in sales.

“This is great news after so many stormy months, between the pandemic and all the logistical problems and additional costs caused by the UK’s exit from the EU,” he said. “Once they are implemented, [the measures] will enhance the value of a product that involves a long chain of small local producers. That’s encouraging.”

Until 2019 the UK was the largest export market for Italian prosecco of the Denominazione di Origine Controllata classification, which requires that a wine satisfy a defined quality standard. The 100m bottles sent to Britain were about 20 per cent of total DOC exports.

Sales fell to 80m bottles in 2020 because of the pandemic, transport difficulties and the additional costs and customs clearance issues connected to Brexit.

“We can only see a brighter future now,” added Polegato, from Refrontolo in Italy’s north-east.

Giorgio Polegato lauded the UK Budget announcement as further good news for a sector that was tested by Brexit and pandemic-induced curbs but is now enjoying a rise in sales © Alfonso Lorenzetto

The UK duty overhaul from February 2023, which Sunak said was the most radical rethink of the centuries-old tax in more than 140 years, marks a departure from EU requirements on excise duty. The intended abolition of the premium on sparkling wines acknowledges that sparkling wines such as prosecco are no longer wholly about luxury consumption.

“It’s clear they are no longer the preserve of wealthy elites,” Sunak said.

Miles Beale, chief executive of the UK’s Wine & Spirit Trade Association, said: “The sector is certainly reinvigorated, but it also depends on the company, the country or the type of wine. If you are a prosecco producer, of course, this is really good news, especially if you export to the UK which is a reasonably major market for wine.”

The UK is also the top export market for French champagne makers, ahead of the US, though the share of the market has dwindled since the Brexit vote in 2016. France’s champagne vineyards were hit by frost, severely denting their 2021 output, but sales have rebounded after the pandemic.

“It is excellent news even if it’s too early to say whether it will have an impact on exports,” said David Chatillon, the head of France’s Union des Maisons de Champagne, which represents big brands such as LVMH’s Moët & Chandon and Veuve Clicquot. 

Prosecco has previously made headlines during the trade war between the UK and the EU ahead of Brexit. In 2016, then Italian economic development minister Carlo Calenda accused Johnson of “insulting” his country by suggesting it should back his version of a Brexit deal or lose sales of prosecco. Calenda told Johnson — then the UK foreign secretary — that Britain would also sell less fish and chips.

Michele Costabile, professor of marketing at LUISS university in Rome, said the UK’s changes would help to maintain good relationships with other countries. “Internationally, it is clear that the UK has no interest in closing itself off [and] penalising a category of goods in which trade between the UK, France, Italy and Spain is very strong, from champagne to whisky.”

Additional reporting by Sarah White and Domitille Alain in Paris

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