FDBusiness.com

The UK market for Scotch whisky continued to grow in 2016 – a clear sign of a reversal of declining demand experienced in recent years. But the current level of tax of 77% on an average priced bottle of Scotch is still too high and more support from government is needed, according to the Scotch Whisky Association (SWA).

The SWA is calling for the Chancellor to ‘Stand up for Scotch’ in the UK Budget on 8 March by cutting excise duty on spirits by 2% to help underpin the domestic market for whisky, as well as jobs and investment within the Scotch whisky industry and its UK supply chain. The SWA pointed to the importance of supporting the industry at a time when there remains uncertainty following the UK’s vote to leave the EU.

The most up-to-date figures available from HM Revenue and Customs (HMRC) reveal the number of 70cl bottles of Scotch whisky released for sale in the UK in the first three quarters of last year totalled 57.2 million, up 5.6% from 54.2 million in the same period of 2015.

The positive trend builds on growing demand in 2015 – the first period of growth in the UK since 2010. However, fewer bottles were sold in the first nine months of last year than in the same period ten years ago, with 62.6m bottles released for sale in the first nine months of 2006.

The SWA says that moves towards a fairer and more competitive excise regime in recent Budgets have helped to support the industry. Last spring, excise on spirits was frozen, following a cut of 2% in 2015 – only the fourth time in the last century that duty on Scotch has been cut – and a freeze and a scrapping of the alcohol duty escalator in 2014. A 2% cut next month would give a further confidence boost to a strategically-important British industry, says the SWA.

Julie Hesketh-Laird.

A fair tax for whisky is also likely to boost spirits revenue to the Treasury. Following the 2% cut in 2015, spirits revenue in 2015/16 increased by £123 million to £3.15 billion. Spirits revenue is now £155 million a year higher than when the duty escalator was ended in 2014.

A strong UK market is particularly important for new entrants to the industry – including the 14 Scotch distilleries opened since 2013 and the eight set to start producing this year. Up to 40 new projects are at various stages of planning and development.

And Scotch whisky is vital to the entire Scottish and UK economies, adding £5 billion in value each year, supporting more than 40,000 jobs and exporting £4 billion of Scotch annually to almost 200 markets.

Julie Hesketh-Laird, Scotch Whisky Association acting chief executive, says: “A strong UK market is vital, particularly for new entrants to the industry. In the last few years, 14 new distilleries have started production in Scotland and a further eight are set to open this year. They need a strong domestic base to grow from. The UK is one of the biggest markets for Scotch in the world, but it is fragile and competitive, particularly so in the context of the historic change Brexit will bring. That’s why we want the Chancellor to support our strategically-important industry by cutting duty.”