SCOTLAND’S £5billion whisky industry has reacted furiously to a hike in excise duty in the budget which will add around 36p to the average bottle of spirits from Monday.

The price rise will have the biggest impact on start-up distilleries, including the new wave of Scottish gin makers, as they rely most heavily on the domestic market to become established.

Alcohol excise duty has been cut or frozen for three years, but will now rise by 3.9 per cent.

The industry said the rise was particularly galling in light of Theresa May referring to whisky as “a truly great Scottish and British industry” at last week’s Scottish Tory conference.

Chancellor Philip Hammond announced the change with the cryptic statement to MPs: “I will make no changes to previously planned up-ratings of duties on alcohol and tobacco.”

It was only after checking the Treasury Red Book on the detail of Budget that the industry saw this translated as “from 13 March 2017, the duty rates on beer, cider, wine and spirits will increase by RPI inflation [retail price index], in line with previous forecasts.”

It then took a hunt through the Office of Budget Responsibility’s Economic and Fiscal Outlook to establish the RPI rate would be 3.9 per cent in 2017-18, double that of 2016-17, and the highest rate between now and 2021-22.

The change also is expected to add 8p in duty to a standard bottle of wine, 10p to a bottle of sparkling wine, 28p to a bottle of vodka, and 30p to a bottle of gin.

However this does not include VAT, which adds a further 20 per cent to the rises.

It is understood to be the first time in 25 years that a Chancellor has raised alcohol duty by inflation on all alcoholic products – the last one being Tory Norman Lamont in 1992.

The Scottish Whisky Association (SWA) said the rise was a “major blow to a key UK industry”, and would take the duty and VAT on whisky to 79 per cent, a fifth higher than in 2010.

It means the excise duty on a 70cl bottle of Scotch is now £8.05 and the total tax is £10.20.

The government is also to consult on a new duty band for still cider just below 7.5 per cent abv to target white ciders, and a new duty band for wine between 5.5 and 8.5 per cent abv.

Warning the hike could undermine the recovery of the UK market for Scottish, SWA acting chief executive Julie Hesketh-Laird said: “A near 4 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."

Charles Ireland, managing director of drinks giant Diageo Great Britain, said the duty rise was “bad for the economy, bad for business and bad for the British public”.

He said: “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 directly supports tens of thousands of jobs’, and just five days later her Chancellor hammers this industry at home.

“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. We believe this duty rate increase will reduce total tax revenue. “We are calling on the Government to reverse this punitive tax hike and fundamentally overhaul what is clearly a flawed excise duty system.”

Pickerings Gin in Edinburgh estimated the change would add 40p to one of their bottles.

A spokeswoman said: “As with every distillery, duty is our biggest overhead. This is going to be detrimental to the industry.”

Dumbarton Labour MSP Jackie Baillie added: “Whisky is one of Scotland’s finest assets and a major employer. This decision could lead to an already precarious situation getting worse. We need urgent action from the UK Government now to protect one of our most prized industries.”

The Wine and Spirit Trade Association (WSTA) said the rise completed a “triple whammy” for an industry supporting 550,000 jobs, coming on top of rising inflation and higher import costs caused by the fall in the pound since the vote for Brexit.

WTSA chief executive Miles Beale said: “It is disappointing that the Chancellor has failed to support a great British industry. He has increased what were already excessive and unfairly high rates of duty for the UK’s wine and spirit consumers and businesses.

“Wine and spirit businesses face a tough trading landscape. This is a missed opportunity to back British business and help out struggling consumers.

“The added uncertainty of another Budget in six months’ time is unwelcome and will further undermine business – and consumer - confidence.”