A “very significant” squeeze on disposable income is forcing Britons to cut back on drinking, the maker of Guinness has warned.

Diageo, which is one of Britain’s biggest pub suppliers, said the country’s economic malaise was the biggest factor in falling alcohol consumption.

Consumers are drinking “fewer servings per occasion”, the company said, although the number of times per month that people drank spirits in Britain rose by 16pc last year compared to 2024. Diageo also makes Smirnoff and Johnnie Walker.

A decline in drinking will add to pressure on Britain’s pubs, as they also grapple with tax raids and changing attitudes towards alcohol among young people.

Sir Dave Lewis, the new boss of Diageo, said: “These fewer serves per occasion point to a pressure in the economics that our consumer groups are facing.”

He added: “What you see is a very significant squeeze on disposable income.”

Sir Dave, the former boss of Tesco who was hired at the start of this year, said reinvigorating Diageo’s relationships with pubs and bars was one of his key priorities to turn around the struggling drinks maker.

He said the “on-trade” segment of its business – meaning sales into bars, restaurants, hotels and pubs – had been “dismantled understandably during Covid” but warned its “buildback has been slow and patchy”.

He was speaking as Diageo slashed its dividend in half, with Sir Dave adding there remained “significant work ahead” after he was forced to cut the company’s sales forecast.

Diageo reported a 2.8pc drop in underlying operating profits to $3.3bn (£2.4bn) in its half-year results as underlying sales also fell 2.8pc.

Sir Dave made the “difficult decision” to cut the dividend from 40.5 cents per share last year to 20 cents and ramped up cost savings to boost its flagging performance.

The prompt action helped the seasoned executive live up to his nickname “Drastic Dave”, earned during his three decades at consumer goods giant Unilever where he oversaw a programme of brutal but effective cost cuts.

However, the cost-saving plan and the weak sales wiped more than £5bn off Diageo’s market valuation on the London Stock Exchange, as shares fell by 13pc on their worst day ever.

The drinks giant also downgraded its full-year guidance for the second time in three months, with sales now expected to fall by between 2pc and 3pc because of ongoing troubles in the US. Profits are predicted to be flat or to rise by low single digits.

Sir Dave, who led a turnaround at Tesco from 2014 to 2020, said he was working on an updated strategy for Diageo, which he said he will unveil in the summer.

He was appointed at Diageo after a lengthy search for a successor to Debra Crew, who left in July following a rocky period of slipping sales and struggles to communicate a vision to both the board and market.

After performing strongly amid the rise of home drinking during the pandemic, Diageo has faced a cocktail of pressures in recent years. The company pivoted towards higher-end spirits and has battled shifting attitudes towards drinking.

More than a third of young people aged between 16 and 24 are shunning alcohol, the Health Survey for England revealed this year.

However, Guinness has attracted many new drinkers from Gen Z – driven by social media trends and growing popularity among young women.

On TikTok, trends such as “splitting the G”, where Guinness drinkers seek to down enough of their pint so the head of the beer bisects the company’s logo, have helped the brand go viral.

The Princess of Wales and Kim Kardashian are fans, and the company was forced to deny reports last year that it could capitalise on its popularity with a sale.

Sir Dave said: “Only several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth.

“To deliver on these opportunities, we need to create more financial flexibility.

“Accordingly, the board has taken the difficult decision to reduce the dividend to a more appropriate level which will accelerate the strengthening of our balance sheet.

“We are confident that this is the right action which will ensure that Diageo can reinforce its position as the leading international spirits business and drive stronger shareholder value over the coming years.”

John Moore, of wealth manager RBC Brewin Dolphin, said Diageo’s results “reflect a company navigating near-term headwinds while positioning for longer-term recovery”.

“The headline might feel cautious this morning, but the real story will be in how Sir David Lewis articulates the path forward.”

Simon Hales, a Citi analyst, said the decision to more than half the dividend had “taken the shine off” the results, which could have “been seen as the clearing event for the stock to rally”.

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