It’s no longer news that Gen Z drinks less alcohol than any
other previous generation. As students, we've heard stories of how nightlife
around Manchester has changed. Once popular student pubs, like Font or Queen of
Hearts in Fallowfield, have closed their doors and left behind only nostalgic
memories from nights out. It's easy to think this change might be just about
health trends or cultural shifts towards wellness, but there's another big
reason behind the scenes: alcohol is simply getting too expensive.
Source: Queen of Hearts, Fallowfield, Manchester. 2009 | Queen of He… | Flickr
Higher alcohol prices aren't accidental. Taxes on alcoholic drinks have risen, driving prices up. For students already dealing with tight budgets, every penny counts. The ‘Alcohol duty escalator’ was introduced between 2008 and 2012 (Institute of Alcohol Studies [IAS], 2020), to keep alcohol taxes always 2% above the inflation rate. At the same time, youth abstinence rose from 18% in 2005 to 29% by 2015 (Ng Fat. L et al., 2018), indicating a correlation (not causation!) between high alcohol prices and reduced drinking among young adults. This pattern of rising taxation has continued over the last few years, with rates set to increase by 3.6% in line with inflation in 2025 (Laleye. T, 2025). The government’s revised tax structure further complicates pricing, with higher taxes on bottled alcohol and high-ABV spirits (Commercial Purchasing, 2025).
Tax changes are compounded with inflation to further intensify price increases. This has hit pubs the hardest, which have seen fewer people coming in over the years. The government is aiming to support on-site drinking, but the cost of running a pub is rising, from rent to energy bills to the National Minimum Wage, which is set to increase in April 2025. This will especially affect prices in these establishments, where it is estimated that a third of all jobs paying at the minimum wage are in hospitality (Francis-Devine, B. 2024). Due to these constraints, businesses end up passing on their costs to the customer. These impacts are already being felt at checkout and in pubs, where draught beer is expected to see a 3% price increase, bottled beer will rise by about 5%, wine prices will jump by 4-6%, and spirits could go up by a whopping 6-8% (Commercial Planning, 2025). Every ‘cheers’ we say suddenly has us reaching deeper into our pockets. Thus, habits change, and more young people are taking supermarket deals over pricey pub pints or lowering their general consumption levels. Why mostly young people? According to studies by The Institute of Alcohol Studies (2018) younger people are more sensitive to price changes in alcohol (which is called price elasticity in economics) than older drinkers. So how is the market reacting to these changes?
There are two sides to every coin, and every market! Alcohol producers are noticing changes in how people drink and the rising cost of production, so their strategies are adjusting accordingly. Since the tax system impacts drinks with alcohol content within a certain range, some firms have decreased the alcohol content in their drinks and through small changes, have reformulated products to avoid higher tax brackets. While these drinks have less of a punch than before, they sell at lower prices and are more attractive to cost-conscious students. These changes in preferences have led to a decline in sales of highly alcoholic drinks, which some researchers argue can lead to positive societal impacts, such as reduced violent crime and accidents, a domino effect that many economists might call a positive externality! (Burton et al, 2024)
We know by now that there have been clear signs of the impact on the preferences of drinkers. Research has found that alcohol consumption drops by 1.1% with every 10% rise in taxes (Connolly. K et al., 2018). Another shift in drinking habits is where alcohol is purchased. We can argue that the rise of drinking at home instead of the pub has been in part since alcohol procured from the supermarket is now significantly cheaper than alcohol at public spots, as previously mentioned. As supermarkets often also frame their products as being significantly cheaper, this may also play on the behavioral tendencies of the average student. A common example of such gatherings are ‘pre-parties’ by students, where people gather to drink before heading to the club. For opponents of alcohol consumption, this is a clear sign of a positive impact of taxes on the industry. Research even suggests that if governments make it more expensive for firms to produce drinks with higher alcohol content, the policy will have greater public health potential over time (Burton. R et al., 2024).
However, alcohol tax remains a polarizing issue. In a
country where the cost of living is rapidly rising, is placing a higher burden
on the less well-off in society the right move? There is also the risk of
shadow markets emerging as a result of increasing prices. Although some
university students will be set back since alcohol remains a popular choice,
this policy may help them internalize an externality that can have detrimental
effects on future generations. With improved financial support for students in
the form of bursaries and student finance, some may argue that these resources
will be better utilized as students divert their money away from alcohol. There
will be criticism, as with any new policy to improve an economy, but once this
storm is weathered we may begin to see the rise of a new kind of going-out
culture, featuring the mocktail, the slightly sober clubbing night and the sensible
university student!.
Reference list
Burton,
R. et al. (2024) ‘The early impact of the UK’s new alcohol taxation
system on product strength and price: an exploratory comparative descriptive
study’, Public health, 232, pp. 61–67. Available at:
https://doi.org/10.1016/j.puhe.2024.04.005.
Commercial
Purchasing (2025) Alcohol Prices in the UK: What’s Behind the 2025 Price
Hikes?, Commercial Purchasing. Available at:
https://commercial-purchasing.co.uk/f/alcohol-prices-in-the-uk-what%E2%80%99s-behind-the-2025-price-hikes
(Accessed: 18 March 2025).
Connolly,
K., Lisenkova, K. and McGregor, P. (2018) The Economic Impact of Changes in
Alcohol Consumption in the UK, University of Strathclyde. Glasgow:
University of Strathclyde. Available at:
https://pureportal.strath.ac.uk/en/publications/the-economic-impact-of-changes-in-alcohol-consumption-in-the-uk.
Francis-Devine,
B. (2024) ‘National Minimum Wage Statistics’, commonslibrary.parliament.uk
[Preprint]. Available at:
https://commonslibrary.parliament.uk/research-briefings/cbp-7735/ (Accessed: 19
March 2025).
Institute
of Alcohol Studies (2020) A brief history of alcohol duty BRIEFING ALCOHOL
KNOWLEDGE CENTRE. Available at:
https://www.ias.org.uk/wp-content/uploads/2020/12/A-brief-history-of-alcohol-duty.pdf
(Accessed: 11 March 2025).
Laleye,
T. (2025) Alcohol prices set to rise from TOMORROW as dry January wraps up –
will your go-to drink be hit?, GB News. Available at:
https://www.gbnews.com/money/alcohol-prices-rise-february-dry-january-spirits-wine-gin
(Accessed: 25 March 2025).
Ng Fat,
L. (2018) Generational divide in trends in abstention from alcohol; more
young people abstaining than older people, IAS. Available at:
https://www.ias.org.uk/2018/10/25/generational-divide-in-trends-in-abstention-from-alcohol-more-young-people-abstaining-than-older-people/.
Ng Fat,
L., Shelton, N. and Cable, N. (2018) ‘Investigating the growing trend of
non-drinking among young people; analysis of repeated cross-sectional surveys
in England 2005–2015’, BMC Public Health, 18(1). Available at:
https://doi.org/10.1186/s12889-018-5995-3.
Office for National Statistics (2018) Adult drinking habits in Great Britain - Office for National Statistics, Ons.gov.uk. Available at: https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/drugusealcoholandsmoking/datasets/adultdrinkinghabits
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