Britain’s craft gin boom could be over unless the Chancellor acts to help small spirts businesses whose sales have been hammered by the Covid crisis, an industry body has warned.
Gin exports have plummeted by 35% since the pandemic began, dropping from £332.6million for the first six months of 2019 to £125m for the same period this year, according to figures from the Wine and Spirit Trade Association (WSTA).
Amid lockdown closures, sales in bars and restaurants fell year-on-year, from £1.1billion, or the equivalent of 12.6million bottles, in the 12 months to July 2020, to £647m in 2021.
The popularity of craft gins has soared in recent year and there are now almost 100 gin distilleries in Scotland, with more planned.
‘These SMEs face significant pressures’
The WSTA said the industry across the UK, made up mainly of small and medium-sized enterprises (SME), was now “feeling the strain,” with its products showing the largest decline out of the top 10 food export categories.
The organisation is calling on Chancellor Rishi Sunak to freeze spirit duty and extend the hospitality sector’s VAT cut to alcoholic drinks in his budget later this month.
Its plea has been backed by north craft spirits firms, Dunnet Bay Distillery and Harris Distillers.
The WSTA said: “Keeping wine and spirit duty rates as they are, instead of the government planned tax rises in line with RPI, will ease the burden on consumers and help businesses and the hospitality sector to survive, recover and eventually thrive.
“Duty is currently so high that 73% of a bottle of spirits, at 40% abv, sold in shops and supermarkets is now taken by the Treasury in tax and VAT.
“The modest ask comes from owners of small and medium-sized spirit businesses, many of whom went above and beyond when they switched to producing hand sanitiser during lockdown.
“These SMEs – which make up the majority of the UK’s spirit businesses – face significant pressures, especially if government decides to raise taxes.”
WSTA chief executive, Miles Beale, added: “This budget comes at a crucial time for spirit SMEs who have a long way to go to make up their huge export losses.
“Following the closure of the hospitality sector, in a series of crippling lockdowns, British gin makers who supplied pubs and restaurants both home and abroad saw orders grind to a halt.
“Instead of sitting idle many distillers switched production to make hand sanitiser with many donating batches to the vulnerable and NHS workers.
“When the country needed support, SME distillers were quick to respond. The Chancellor has an opportunity to make a small gesture of thanks by freezing spirit duty in the autumn budget.”
‘Very uncertain times’ for industry
Simon Erlanger, managing director of Harris Distillers, in the Outer Hebrides, warned a tax increase would add to the problems the industry faces.
He said: “We are facing very uncertain times as we deal with a slow recovery of our hospitality business, increasing costs across the board and a real risk of rising inflation.”
He continued: “Any increase in duties and taxes would add to these difficulties.
“People don’t realise that almost three quarters of the cost of the average bottle of gin is already made up of taxes.
“Evidence shows that when duty has been frozen in each of the last three budgets, tax revenues for the government have actually risen.
“So a duty freeze can be a win-win and an extension to the VAT cut could help our hospitality customers get back on their feet.”
Feeling the impact of Brexit and Covid
Martin Murray, co-founder of Dunnet Bay Distillery, which makes Rock Rose gin and vodka in Caithness, added: “We’ve found it very difficult in the past 18 months with the impact of Brexit and Covid-19 having a detrimental affect on our business.
“We’ve lost sales due to the impact on tourism, hospitality and our export sales. Thankfully our website has seen growth to help offset some of these and our distribution of hand sanitiser kept us busy in the early months of the pandemic.
“With rising material costs, export paperwork costs and shipping costs it is critical that small distilleries are protected from duty increases.
“In fact I’d go further to say that craft distilleries should see a reduced level of spirits duty applied to mirror the benefit that craft breweries receive.”
Recent figures showed there are more than 300 companies producing spirits in England and 214 in Scotland.