Duty hikes could delay UK distillers’ expansion plans

A poll commissioned by the newly-formed UK Spirits Alliance found 84% of the nation’s distillers plan to “dramatically” increase production over the next 12 months, but fear a duty rise in this year’s Budget would put their plans at risk.

The spirits duty freeze in the 2018 Budget “provided a boost” for the industry

Launched today (16 July), the UK Spirits Alliance is calling on spirits producers across the country to tell the government to freeze duty for the length of parliament and reform it.

The campaigning association has been launched “in response to the boom” of national drinks such as whisky and gin, new craft distilleries opening, innovative new products tapping into consumer trends, and a “wider spirits ecosystem” that supports mixers and pubs, bars and restaurants in the UK.

Current supporters of the UK Spirits Alliance include Bacardi, Brown-Forman, Diageo, Pernod Ricard and Hayman’s.

A poll by Survation for the UK Spirits Alliance found that 65% of the nation’s distillers have reported increased sales of spirits since chancellor Philip Hammond froze spirits duty in the 2018 autumn Budget. A total of 26% of respondents said sales had remained the same, while two distilleries reported a drop in sales.

Survation, which conducted the survey between 25 June and 10 July, interviewed 58 UK-based companies about their UK distillery operations, their product offerings, business plans and how a duty rise would affect their firms.

The poll found that nearly a third of producers are planning to more than double their production over the next five years.

One third of respondents warned that they could be forced to delay or cancel plans to increase production over concerns that increased duty fees could “put the brakes on the industry”. More than a quarter of respondents fear they would be forced to reduce their employee numbers.

‘Support spirits’

In terms of turnover, 48% of the distilleries had a turnover of under £500,000 (US$622,375) and a further 19% had a turnover of between £500,000 to under £1 million (US$1.24m). Four of the respondents (7%) had a turnover of more than £500m (US$622m).

The majority of companies surveyed produce gin (93%), followed by vodka (40%), whisky (29%) and rum (22%).

Looking at exports, 60% of the distilleries exported overseas while 40% did not. Of those that exported, 68% said that under 30% of their product was exported. In the next 12 months, 70% expect to increase exports.

A spokesperson for the UK Spirits Alliance said: “This survey of spirits producers across the UK makes it clear – the chancellor’s decision to freeze spirits duty in 2018 provided a boost for our industry, sparking growth that will deliver more money than expected for the Treasury.

“But distillers large and small fear that an increase this year would undo this good work, potentially putting a great British success story at risk.

“The UK Spirits Alliance has been formed to speak with one voice when it sends a simple message from the spirits industry to the new prime minister – back growth, back jobs, back a UK success story.

“Support spirits by freezing duty for the length of this parliament, while reforming it to give the industry the security and confidence it needs.”