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SME distillers call for duty freeze to prevent the British gin bubble from bursting

Published:  12 October, 2021

Britain’s gin makers are calling on Chancellor Rishi Sunak to freeze spirit duty and extend hospitality’s VAT cut to alcoholic drinks to help boost British business.

According to the latest gin export and UK on-trade sales stats from the Wine and Spirit Trade Association (WSTA), gin exports have plummeted 35% since the pandemic began, dropping from £332.6m for the first six months of 2019 to just £215m for the same period in 2021.

The stats revealed that the closure of the on-trade due to the pandemic meant that gin sold in pubs, bars and restaurants almost halved in value from £1.1bn, or the equivalent of 12.6m bottles, in the 12 months to July 2020 to just £647m, or the equivalent of 6.9m bottles, for same period to July 2021.

Small and medium size distillers have called for the Chancellor to keep wine and spirit duty rates as they are, instead of the Government planned tax rises in line with Retail Price Index. They said this would ease the burden on consumers and help businesses and the hospitality sector to “survive, recover and eventually thrive”.

Under current duty rates 73% of a bottle of spirits, at 40% ABV, sold in shops and supermarkets is now taken by the Treasury in tax and VAT.

“This Budget comes at a crucial time for spirit SMEs who have a long way to go to make up their huge export losses,” said Miles Beale, chief executive of the WSTA.

“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.”

He said that 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,” he said.

Kathy Caton, founder of Brighton Gin, said: “When hospitality closed it in effect shut 90% of our customers overnight. Despite that seismic shock to our turnover, we were totally committed to our community and doing all we could do to help, including switching our production to not-for-profit hand sanitiser effects.”

She added that 18 months later it continues to make not-for-profit hand sanitiser donating many thousands of bottles to help those in need.

She added: “For our company to have survived and still be trading sometimes seems like a miracle, particularly with the added pressures of Brexit, supply chains and distribution.”

Matthew Gammell, co-founder and head distiller at Pickering’s Gin, said: “We entered into 2020 already feeling the effects from the hesitancy from European export markets with Brexit and then Covid-19 hit the UK.”

Gammell said that the total loss of all travel retail and particularly cruise ships hit the company hard, along with the loss of the on trade.

“While we are now seeing a return of the on trade there are a lot of businesses that have not survived and those that have survived have changed their buying patterns and are operating much shorter term as there is no confidence yet that they will be able to trade without restrictions,” he said.

The UK is the world’s largest spirit exporter and a great British success story. In 2019 Britain recorded over 440 distilleries, an increase of 22% on 2018 and more than double the number of distilleries recorded in 2014.

The WSTA has already called on the Treasury to freeze wine and spirit duty and extend the hospitality VAT reduction in the Autumn Budget to allow the country to climb out of the Covid-19 slump.