The move comes in response to high tax rates, the rising costs of production, and reduced beer consumption as austerity measures continue to bite.
The reduction of alcohol content will come into effect next month and is set to save Dutch brewers Heineken, who own the brand, £6.6m in duty per year.
Beers with lower alcohol content pay a lower rate of duty as part of the government’s attempt to tackle problem drinking.
The brand, which is raising the price of the famous bitter by roughly 2.5p a pint, told The Financial Times that the move would bring the alcohol content in line with that of its competitors, including its biggest rival Carlsberg’s Tetley Smoothflow.
They said it would not impact on the flavour and they would invest the savings in brewing and marketing John Smith’s.
But Philip Evans, club secretary at the working men’s club in Grimethorpe, a mining village 25 miles from John Smith’s brewery in Tadcaster, North Yorkshire, complained to the newspaper: “The brewery wants to weaken the beer and raise the price. We are going to sit the rep down and tell him it either goes down or it goes out.”
Heineken blamed the rising cost of energy and ingredients, such as barley, and rising beer duty for the move.
UK beer duty is rising at 2 per cent above inflation annually under the beer escalator introduced in 2008.
Britons now pay more tax on beer than 16 major European countries combined, according to the British Beer and Pub Association. The Treasury raises £9.2bn annually from the production and sale of beer.
But the association does not expect other brands to follow suit and drop their alcohol content despite the fact that British drinkers are getting a taste for weaker beers.
Lobby group The Campaign for Real Ale point out that over a third of every pint pulled in a pub is now paid in duty and VAT.
At the same time as taxes have risen by 40 per cent since 2008 the number of regular pub goers has dropped by 3m and more than 5,800 pubs have been forced to close their doors. .