Distillers consider production cuts amid tax hike

Almost two-thirds of UK distillers expect to reduce production due to a rise in spirits duty, a new survey revealed.

The UK Spirits Alliance (UKSA) – which represents more than 280 small and independent distilleries across the country – is calling for a freeze on spirits tax ahead of chancellor Jeremy Hunt’s autumn statement (22 November).

There are fears that the government will increase alcohol duty again following the 10.1% hike for spirits in August.

The UKSA has conducted a survey of distillers to find out their prospects for the future and how the last 12 months have been.

According to the survey, 54% of respondents have either not recovered or only partially recovered from the pandemic, while 40% of businesses reported a decrease in sales.

Meanwhile, 61% of distillers expect to cut the amount of spirits they produce.

Looking ahead, 49% warn that rising duty will have a major impact on consumer demand for their product.

A further 70% of distillers fear their ability to invest in business improvements such as production capacity and innovation will be affected by the duty hike.

Nearly half (43%) of those surveyed said that the increasing tax rate will hit their staffing levels.

Stephen Russell, managing director of Kent-based Copper Rivet Distillery, said: “The chancellor’s cavalier approach to the duty regime is pushing up inflation. He still has time to back our thriving British spirits industry by freezing duty.”

Chris Jaume, co-founder and director of York’s Cooper King Distillery, believes the duty rise has “driven up the price of our spirits, harming the valued hospitality venues we supply, and is effectively an unfair tax on consumers who want to support their local distillery.”

He continued: “If duty continues to rise, we’ll see demand and production drop, and our green investments stall.”

‘Outdated view’

The UKSA has criticised the government’s Brexit Pubs Guarantee for excluding spirits, providing an “outdated view of how our hospitality industry thrives”.

In its submission to the Treasury ahead of the autumn statement, the UKSA wrote: “The chancellor should ensure a fair approach across the industry, and freeze duty on all drinks enjoyed by consumers, rather than simply a beer and a cider pulled in a pub.

“The Brexit Pubs Guarantee not only does little to support pubs, bars and restaurants but also penalises adult customers who might prefer a gin and tonic, or a Spritz over a beer or a cider.”

Neema Rai, owner of London venues The Battersea Barge and Tamesis Dock, warns the Treasury could “kill off the renaissance in British spirits and send pubs and bars back to the uninspiring days of the 80s”.

Rai called on the government to support the spirits sector, as it has with the beer industry, to allow it to “survive and thrive”. Rai said spirits make up one-third of all alcohol sold in the on-trade.

More than 400 UK businesses have written to the chancellor asking for a duty freeze on alcohol in the autumn statement.