ELLC founder: HMRC decisions were ‘tone-deaf’

Following his purchase of the East London Liquor Company (ELLC) out of administration earlier this week, Alex Wolpert told us about his experience negotiating his debts.

ELLC was founded in 2014 but nearly faced its end this week when HMRC refused to extend its Time to Pay agreement, asking the business to pay its debts in full instead of in monthly instalments.

“I’m not anti-tax,” explained Wolpert. “Our spirits industry makes up a huge amount of revenue for the government in excise duty – we generate a huge amount of that revenue. That is a liability that we need to pay – the same with national insurance and VAT and all the other tax liabilities that we, as a business, incur. It is 100% on us to make those payments.”

Wolpert was more than willing to pay the business’ debts over time, but received no assurances from HMRC that any large upfront reductions would guarantee ELLC’s survival.

“To be asked to pay a large lump sum of what was outstanding – which we couldn’t do without any assurances that they wouldn’t ask us for the balance – gave the tenor of the negotiations a huge amount of uncertainty. We didn’t feel like we had the confidence, even if we could scrape together the money initially, for the first chunk to be paid down.”

Time to Pay agreements became more common during the pandemic, helping businesses that were struggling to pay off their tax debts during lockdowns. “At the time, it felt very progressive,” said Wolpert. “But to be restricting the repayment terms at a time when the economy is really at rock bottom just misses the progressiveness that it had at the beginning.

“Time to Pay was absolutely the right thing to do, but to restrict and remove the flexibility that we had early on now feels tone-deaf.

“Trading has been tough. Consumer confidence is at an all-time low, and there’s been industrial action and high interest rates – there are so many headwinds that all together make for an extremely challenging trading environment. Not only for independent businesses, but for the on-trade, generally. And we do most of our business through the on-trade.”

Putting the business into administration wasn’t the only option Wolpert considered, with the team having looked into selling some of ELLC’s whisky stock to pay for the debts. There were also redundancies prior to the administration, with nine full-time roles remaining.

“The pre-pack piece sometimes gets bad press because people often don’t understand what the other option is – which is quite often to just liquidate the business and walk away, with no jobs saved, and the brand is dust.”

The business is now co-owned by Wolpert, Barworks, Andreas Akerlund (a founder of Barworks) and Roland Grain, who is the brand’s strategic partner in Austria.

The move means that ELLC’s shareholders are unlikely to receive any of their investment back. “It’s with the administrators at the moment. I can’t comment on that – because I don’t know,” said Wolpert.

ELLC raised £1.5m (US$2m) in its first round of crowdfunding in 2018. Its second round of crowdfunding surpassed the business’ goal of £750,000 (US$1m) in May 2021. Its Crowdcube page states £902,261 (US$1.3m) was raised from 757 investors.

“Of course, shareholders are disappointed and upset,” said Wolpert. “But the overriding sentiment from the smallest to biggest shareholders over the past 24 hours has been: ‘Are you okay? Can we help? Have a good Christmas.’ It’s pretty flooring when people have lost their investment.”

“I think everyone gets into crowdfunding with their own motivations. Some just want to back a brand they love – some people expect some kind of return.”

The decision to be transparent is part of how ELLC has always operated.

“We want all our shareholders who have lost their stake in the business to see what was going on. Some people will still buy ELLC. And if we lose some customers, then that’s obviously very sad.

“But the intention was to be as open as possible to maintain the way we’ve always done business and how we’ve carried ourselves in the industry. The lack of smoke and mirrors has been one of our calling cards – not just with what we put in our liquid, but how we operate.

“Opening things up makes us vulnerable – I’m sure some opportunistic competitors could use this as a chance to nip into our customers. But it’s a moral position as a founder to be able to say: ‘This is what we’ve gone through.’

“I hope that it shows other businesses that there’s a different way of doing things, but there’s also an opportunity if we can help with any businesses who have gone through or are going through similar situations.”

The future for ELLC is uncertain. The team are considering streamlining options, from consolidating logistics to taking a whisky-production hiatus and reconsidering the brand’s premises. “Right now, it feels like we’re just stabilising the ship and seeing how we come out of this.”

But Wolpert is keen to emphasise that the issues that ELLC is facing are the same as those faced by the rest of the on-trade.

“Unfortunately, there are a few sharp intakes of breath when anyone mentions January in the industry. We’ll have to wait and see how that all shakes out.”