The new UK government has defined itself as being “mission-led”. But with only two weeks to go until the first budget, the Chancellor appears to have been handed mission impossible: ignite economic growth while managing a budget blackhole.
It is a challenge that would be daunting to any politician or business leader, but it’s one the British spirits industry has an answer to – an answer that will allow the Chancellor to support business growth while simultaneously increasing Treasury revenue to spend on public services.
Last year’s 10.1% rise in excise duty on alcohol, the largest increase in 40 years, has had a devastating impact on the spirits industry in the UK, putting the category in decline and undermining growth in iconic British gin and whisky brands.
And significantly, last year’s rise has harmed the Treasury itself. Far from resulting in increased returns to the Treasury, the tax increase on spirits has led directly to a loss in revenue of just under £300m in the year since.
The previous government’s decision has resulted in both the spirits industry and the Treasury facing an unnecessary spiral of decline over the past year, with the implications of last year’s duty rise exacerbating a variety of other challenges facing our industry.
This includes the increasing loss of inventory due to theft, which is one of the biggest challenges facing spirits in a retail setting. The Association of Convenience Stores’ May 2024 Crime Report found there had been 5.6 million incidents of shop theft over a year. This ‘shrinkage’ was particularly prevalent in spirits, whose soaring costs have driven theft across premium and super-premium brands. The spirits industry needs support, but in recent years it has received the opposite.
Investing in spirits, and more broadly in retail and hospitality, means investing in UK economic growth. The spirits industry provides over 446,000 jobs, contributes £13bn to the UK economy, and accounts for £4.4bn of retail sales across grocery every year.
At Monday’s International Investment Summit, the government affirmed that economic growth was its number one mission and that it would not repeat the mistakes of the past. We urge the Treasury to put these words into action. Reversing the consequences of last year’s duty rise, which has not only crippled our industries but proven unfair for responsible consumers that enjoy a G&T or dram of whisky, is a decision that will not only provide vital support for our industries, but ultimately itself.
There is reason to hope. We have a new government that has rightly voiced its support for scotch, retail, hospitality, pubs, and more. Now is the time to prove what that support truly means.
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