Gin boom could be ruined by tax increase

By Nicholas Robinson contact

- Last updated on GMT

Gin doom? WSTA issues warning ahead of Budget
Gin doom? WSTA issues warning ahead of Budget
A horrendous tax bill could choke the dramatic growth of the British gin industry if the Chancellor does not freeze duty on spirits, according to the drinks trade in a desperate plea to the Government.

Gin distillers and the Wine and Spirit Trade Association (WSTA) have called on the Chancellor to kill off a planned rise in spirits duty, or see the sector decline.

Chancellor Philip Hammond has received a letter from 17 of the UK’s top distillers and the WSTA outlining their concerns over proposals to increase spirits duty in the November Budget.

In 2016, Summerhall Distillery paid 31% of its annual turnover in duty alone. Our bottles retail at £29.95, which means 45% of the money spent on a bottle of Pickering’s gin goes on duty and VAT

– Matthew Gammell, co-founder of Pickering’s Gin

An additional £25m will be collected in gin duties compared with last year if Hammond puts the boot in on booze for the second time this year.

Last year, inflation increased the price of spirits by an average of 30p (3.9%) per bottle, with another “sneaky” rise set to add another 26p (3.4%) to a bottle, said WSTA.

£2bn from British gin

If the increase goes ahead, the Government will rake in £2bn from British gin over the next two years, according to the WSTA.

More than 45% of the price of a bottle of some gins will be made up of duty and VAT alone if the rise goes ahead, claimed one distiller.

The gin trade has heralded creative and profitable entrepreneurial spirits businesses, which would suffer or potentially be wiped out if another rise is to go ahead, experts warned.

Yet, these businesses have driven the gin renaissance, allowing British gin to achieve record growth at home and overseas.

The gin distillers’ plea for a freeze comes a week after frustrated English wine producers​ signed a joint letter to Hammond calling for him to scrap planned wine duty hikes and support the home-grown wine industry.

Cocktail craze

WSTA chief executive Miles Beale said: “The gin renaissance has benefited from the craft cocktail craze that has been sweeping the country in the past couple of years.

“We have seen a rapid growth in the number of distilleries in the UK and a new wave of UK and spirit makers are turning their hand to gin production in a bid to keep up with the thirst for new gin experiences.

“However, Government is stifling the gin boom by adding to its already high tax bill this year.”

He added: “British gin is a global phenomenon, which is why we are asking the Chancellor why he is penalising what Britain does best? By freezing spirit duty he would be allowing industry to invest, create jobs and grow.”

The number of distilleries in the UK has more than doubled to 273 in the past five years, with 40 opening in the past year alone.

What the distillers say:

Matthew Gammell, co-founder of Pickering’s Gin in Edinburgh:

“In 2016, Summerhall Distillery paid 31% of its annual turnover in duty alone. Our bottles retail at £29.95, which means 45% of the money spent on a bottle of Pickering’s gin goes on duty and VAT.

“These hugely unfair tax burdens mean that cash flow is severely restricted when a business like ours is trying to grow.

“The current proposed increase in duty of 3.4% would mean an increase in duty of £24,500 that, for us, is the equivalent of another employee. We would like to continue to grow and help boost the British economy but it is becoming increasingly tough to remain competitive in the marketplace.”

Alex Wolpert, founder of the East London Liquor Company:

“We absolutely support a freeze on spirit duty, particularly as this is an opportunistic second increase this year at a time the Government knows only too well that alcohol sales increase considerably over the festive period; duty already accounts for approximately 40% of our bottle price.

“With the current economic landscape, including the cost of living increasing and wages at an all-time low, the consumer ends up being the one to foot the Chancellor’s duty increase, perpetuating the problem of the public’s expendable income being further reduced.”

Related topics: Spirits & Cocktails

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