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Tax hikes blamed for dip in UK whisky sales

THE Scotch whisky market in the UK shrank again in 2013, declining by 3%, after a year of stability in 2012, new figures have shown.

HIGH PERCENTAGE: The SWA estimates 79% of the average price of a bottle of whisky is down to tax. Picture: Gordon Terris
HIGH PERCENTAGE: The SWA estimates 79% of the average price of a bottle of whisky is down to tax. Picture: Gordon Terris

The whisky industry is under pressure from a range of factors, including a preference among younger people for alternative spirits and wine and the lingering impact of the 2008 recession on consumer spending.

Trade body, the Scotch Whisky Association (SWA), yesterday argued that tax is also pushing up the price of whisky in its home market, the third most important for the industry, making it harder for the to generate sales and make the case for better tax treatment overseas.

David Frost, SWA chief executive, said: "It's obviously disappointing to see this decline in Scotch whisky volumes in our domestic market.

"In next week's Budget the Chancellor has the perfect opportunity to support a vital Scottish industry.

"He should scrap the unfair alcohol duty escalator and freeze duty this year."

The number of 700 millilitre bottles of Scotch whisky released for sale in the UK fell to 87.5 million in 2013 from 90.1m the previous year, according to Government figures.

Since the introduction of the escalator, which mandates duty rises at two percentage points above inflation, the UK market for Scotch whisky has declined more than 15% in volume from 103m bottles in 2008.

This period also coincided with the recession.

The greatest drop came early on with the number of bottles released falling 10.8% to 92.1m in 2009.

There was a slight rebound in 2010 but a further drop in 2011 with numbers broadly flat in 2012.

A spokeswoman for the for the SWA said it is "fairly tricky" to find a direct link between the sales fall and the rise in duty. But she added: "We think part of the pressure is coming from the tax treatment."

In last year's Budget, the escalator was removed from beer and duty was cut in a move the Treasury said was to protect the British pub industry.

The SWA argues that whisky drinkers now pay 48% more duty than beer drinkers for the same amount of alcohol.

Mr Frost said: "Since the introduction of the escalator in 2008, the UK market for Scotch whisky has shrunk by more than 15%.

"Fairer tax treatment would help address this decline in the UK.

"It would send the right message to overseas governments in markets where imported products, such as Scotch whisky, face discrimination.

"It would also reflect and support the UK's drive for export-led growth."

Figures from International Wine & Spirit Research show that Scotch whisky accounts for 20.4% of the UK spirits market, behind vodka at 29.9%.

The UK market is the third most important to the whisky industry after France, where sales are more than double those in Britain, and the United States.

Much of the industry's focus has in the last few years has been on growing exports, particularly to emerging markets in Asia, until the recent sales hiatus.

In 2012, some 1.2bn bottles of whisky were exported, 13 times those released for sale in the UK.

But the world's largest spirits company, Diageo, recently aired its first television advert for 50 years for its flagship Johnnie Walker whisky brand in the UK.

The SWA estimates that 79% of the average price of a bottle of whisky is tax.

Evelyn Gillan, chief executive of Alcohol Focus Scotland, called for the Government to maintain its tax position.

Dr Gillan said: "The alcohol duty escalator is entirely appropriate, fair and beneficial to our economy and society.

"Alcohol has become far too cheap and this affordability has been associated with rising consumption and harm.

"Spirits should be taxed at a higher rate than wine and beer because they are far stronger and carry a greater risk of health and social harm."

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