Cost pressures that are troubling pubs and breweries have spread to the nations G&T brigade as a triple-whammy of duty hikes, tax rises, and spiralling business costs are forcing distillers to shut down.

Over the last decade hundreds of entrepreneurs have launched innovative distilleries producing high quality, sustainable British products for pubs, supermarkets and sold them around the world.

From today a 3.65% increase in excise duty, announced in the budget last year, comes into effect.  This follows a 10.1% increase imposed by the previous Government in 2023. 

The UK Spirits Alliance has now written to the Chancellor warning that the latest tax hike will bring the curtain down on a golden age in which the sector boomed, consumers rediscovered quality British spirits and pubs and bars embraced new drinks and customers.

Kathy Caton, founder & MD of Brighton Gin said: “Brilliant British entrepreneurs who, through guts and graft, have created businesses producing world-beating products that consumers love are being seriously let down by this government, and the ones before it.

“Instead of celebrating a British business success story, successive Chancellors have chipped away at the spirits sector and the 1 February tax increase could be the final nail in the coffin for many.

“For many distillers and their staff this extra burden may be the end, seeing the closure of great local and community businesses that have provided employment – and ironically seeing lower contributions to the Treasury” 

One distiller said sugar costs are up 13% last year for its rum production. Grain for whisky used prior to the invasion of Ukraine was £490 a tonne. It’s currently £925 a tonne.

Energy costs to run the stills are at an all-time high and even the cost of water is rising.

Following the 2023 duty increase, a survey of distillers showed that 70% of distilleries in the UK feared for their ability to invest in their business. 

A more recent poll of pubs – ahead of the 2024 increase – showed that 1 in 4 have a distiller supplier that has gone out of business.

The letter spells out that spirits drinkers are being priced out of pubs and bars, while lager drinkers are being subsidised. The rise in duty means the UK spirits tax remains higher than the UK average across EU member states, highest in the G7 and the highest in Europe.

This means 70% of the cost of a bottle of gin is currently claimed by HMT. Recent analysis by the Scotch Whisky Association estimates that since recent duty hikes, the Treasury is losing £350 a minute or half a million pounds a day in tax revenue.  

Pre-budget polling from Survation showed 61% of people, who go out to eat and drink, are reducing the number of times they are doing this because of affordability. Consumers feel all drinks are too expensive in their area – but it is highest for cocktails (65%) and lowest for beer (52%).

The UKSA also warns that the end of the golden of spirits is bad news for pubs. Spirits make up one-third of all alcoholic drinks sales in hospitality settings and generate substantial revenues for the hospitality sector.

Polling found 66% of pub owners state that spirits generate a higher profit margin per serving than beer. A survey last year showed some 16% of pubs say they are unlikely to be open in 12 months’ time.

This Government and the previous Government have either frozen or reduced duty on draft beer (‘a penny off a pint’). But  88% of bar owners and publicans said it will have no impact as they fight to keep their doors open amid rising taxes and the costs of living for their customers. The hike in spirits duty will damage custom, say 77 % of pub managers.