Scotch distillers fear rising energy costs and threat of tax hike

Nearly three quarters (72 percent) of Scotch Whisky distilleries expect their energy costs to rise this year according to research, despite more than half (53 percent) having already seen prices rocket in the last 12 months.

A survey of distilleries conducted by the Scotch Whisky Association found that a quarter of businesses (27 percent) expect energy rise by over half again in 2023, with distilleries being exempt from the government’s business energy relief scheme.

Two-thirds of distillers also expressed fears rising costs could be compounded by the Chancellor announcing an increase in excise duty in the Budget, which would come into force from 1 August.

Jeremy Hunt confirmed in December that duty would remain frozen until 1 August when a new system to tax alcohol comes into force, having initially reversed the freeze announced by his predecessor, Kwasi Kwarteng.

SWA Chief Executive Mark Kent

“Unlike other parts of the alcohol industry, distillers have been left out in the cold and unable to access the government’s business energy relief scheme."

An increase in duty by the rate of inflation in the winter would have represented the biggest tax hike on Scotch since excise duty was introduced in 1642, despite 70 percent of the cost of a bottle already being claimed in tax.

The Scotch Whisky Association has called on the Chancellor to freeze duty beyond 1 August to support the industry and its adaptation to the new tax system, warning an increase could harm business investment and the hospitality sector during the cost-of-living crisis.

Mark Kent, Chief Executive of the Scotch Whisky Association, said:

“The government provided much-needed certainty in December by extending the duty freeze. It was the right decision then and would be the right decision in the March Budget. Only a few months on from the extension of the freeze, the economic challenges our members and the businesses they rely upon face are not going away.

“Unlike other parts of the alcohol industry, distillers have been left out in the cold and unable to access the government’s business energy relief scheme, so any rise in duty would further compound the pressures they currently face in paying rising energy costs.

“Scotch Whisky has consistently delivered for the UK economy when given stability and certainty through duty freezes, enabling the industry to reinvest in the economy. Our message to the Chancellor is clear - increasing duty would be the wrong decision and the wrong time. By freezing duty the government can support Scotch and avoid unnecessarily fuelling inflation at a time when there are already significant pressures on businesses and households, and consumers.”