Industry body questions Chancellor’s budget and its potential to reverse growth as Brexit approaches
THE WHISKY INDUSTRY BODY, the scotch whisky association (SWA) has described the UK Government’s decision to increase the excise duty on spirits by nearly 4 per cent as a “damaging blow.”
Yesterday (Wednesday 8 March) the Chancellor Philip Hammond delivered his spring budget which he claimed gave more help for the oil and gas sector and £350m worth of extra spending to Scotland.
However the industry fears for the security of the industry post-Brexit and this budget which will see an extra 36 pence of tax placed on each bottle of scotch weakening sales and exports.
“Distillers will find it hard to understand why the Chancellor is penalising a strategically important British industry with this tax increase.” Julie Hesketh-Laird
The comments come after Prime Minister Theresa May and Scottish Tory leader Ruth Davidson both stated at last weekend’s Conservative party conference in Glasgow that Scotch whisky had suffered because of EU tariffs and that a Conservative Government would protect the whisky industry.
Julie Hesketh-Laird, the acting chief executive of the SWA, said: “A nearly four per cent duty rise and a 79 per cent tax burden on a bottle of whisky is a major blow, reversing recent progress. Distillers will find it hard to understand why the Chancellor is penalising a strategically important British industry with this tax increase.
“At a time when government should be supporting a key home-grown sector, we face a damaging tax rise on top of the uncertainties of Brexit. Looking to the autumn Budget, we will be arguing strongly that it is time for a new approach to excise duty outside the constraints of EU excise law. The system is in need of a fundamental review and reform to make it fair and competitive.”
The Chancellor Philip Hammond said there would be “no changes to previously planned upratings of duties on alcohol”. Yet during the budget speech these “previously planned upratings” were revealed to be a 3.9 per cent hike.
Whisky experts argue that the damaging effect of the increase in excise on spirits means that the average price of a bottle of Scotch is 21 per cent higher than in 2010. They have argued that an industry that works within tight margins can not suffer the increase of tax from £8.05 a bottle to £10.20.
Hesketh-Laird question the accuracy of the UK May’s pledge at the Scottish Tory party conference to support the industry as a “truly great Scottish and British industry”. Over 40,000 jobs around the UK rely on the health of the whisky business and they add a value of £5bn per year to the UK and Scottish economy. However, the excise from spirits goes straight to the Treasury in London, even though the majority of distilleries and connected businesses are based in Scotland.
In a statement to CommonSpace a spokesperson on behalf of Charles Ireland, managing director of Diageo GB, said: “Today’s tax blow from the Chancellor is bad for the economy, bad for business and bad for the British public. It is staggering that the prime minister stood up in Scotland only on Friday and said that Scotch Whisky is “a truly great Scottish and British industry” and just five days later her Chancellor hammers this industry at home.”
“It is staggering that the Prime Minister stood up in Scotland only on Friday and said that Scotch Whisky is “a truly great Scottish and British industry.” Spokesperson for Charles Ireland
“Tax on Scotch Whisky is now so high – nearly 80 per cent of the price of an average bottle will go straight to the Government.”
Around 80 per cent of the Scotch whisky industry’s contribution to the UK economy comes from exports. There is a danger the Scotch industry will lose markets in East Asia and South America, because trade agreements in these areas are currently brokered by the European Union.
According to the SWA trade association, the total value of Scotch whisky exported from the UK last year reached £3.999bn, a rise from £3.845bn in 2015. The previous three years were above £4bn, peaking in 2012 at £4.283bn. The USA still remains the biggest market for sales, rising from £749m to £854m. France remained the biggest importer of Scotch by volume, with 189m bottles. The value of sales in France was £424m, of which single malts made up £153m.
“We are also committed to working closely with them, as we are with the many business sectors across Scotland, as we prepare to enter negotiations to leave the European Union.” Treasury spokesperson
Responding to concerns in the industry, a spokesperson for the treasury said: “The government recognises the contribution the scotch whisky industry makes to the UK economy as a global business representing the best of Britain.
“Whisky is one of Scotland’s global success stories, accounting for around a quarter of UK food and drink exports. The industry generates millions of pounds for the UK economy, and supports thousands of jobs.
“The UK Government confirms its continued support of the whisky industry which recently has seen an increase of exports sales thanks to reductions in trade barriers.
“We are also committed to working closely with them, as we are with the many business sectors across Scotland, as we prepare to enter negotiations to leave the European Union.”
Picture courtesy of Spirit of Speyside & Business for Scotland
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