Distilleries to cut production in face of duty hikes

The UK Spirits Alliance (UKSA), which represents more than 280 small and independent distilleries, has warned that two thirds of its members will cut production volumes if no action to reduce alcohol duty is taken.

The UKSA has published its submission to the Treasury ahead of the Autumn Statement, calling on ministers to freeze duty on spirits.

Its call to action follows a new survey of distillers which reveals how businesses are grappling with the ongoing fall out from Covid-19.

Over half (54%) say they have either not recovered or only partially recovered from challenges caused by Covid-19. Two in five (40%) businesses also reported a decrease in sales, as part of the survey undertaken by research firm Survation. The Survation survey asked small and independent spirits distilleries from across the country about the last 12 months and the prospects for the future.

Spiralling costs are also having a major impact, and spirit makers are fearful of the effect of the 10.1% increase in alcohol duty introduced on 1 August.

As reported by the drinks business this week, the UK Government is expected to announce its second duty hike in just four months as part of the Autumn Statement on 22 November. 

Spirits makers have warned that a second tax hike in the space of six months at the Chancellor’s Autumn Statement will be a disaster for struggling pubs, hospitality businesses and companies in the supply chain.

Looking to the future, 49% warn that rising duty will have a major impact on consumer demand for their product. As a result, almost two thirds (61%) expect to cut the amount of spirits they produce.

A further 70% of distillers fear their ability to invest in business improvements such as production capacity and innovation will be impacted by the increase in duty. The rising duty rate is also a risk to staffing levels, with 43% of distilleries surveyed warning about the impact.

In light of these findings, the UKSA is calling for a duty freeze ahead of next week’s Statement.

The industry also criticises the government’s so-called Brexit Pubs Guarantee which it says “does little” to support pubs, because it excludes spirits.

In its submission to the Treasury, 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.”