SCOTCH whisky sales have fallen by one million bottles in the UK in the wake of the so-called spirits tax.

Official HM Revenue & Customs figures show 36.7 million bottles were sold in the world's fourth biggest market for Scotch in the first six months of 2017 – down from 37.7 million in the same period last year.

The Scottish Whisky Association (SWA) blamed the 2.6 per cent fall on the hike in excise duty announced in the March budget which added around 36p to the average bottle of spirits.

It comes as it emerged the prices of rare Scotch whisky have been soaring in recent years while the industry has been expanding at historic levels.

It was feared the March price rise would 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 had been cut or frozen for three years, but rose by 3.9 per cent from March.

HeraldScotland: A Scotch whisky bottling line.

The £5 billion whisky industry said the rise was particularly galling in light of Theresa May referring to whisky as “a truly great Scottish and British industry” at the Scottish Tory conference in March.

The SWA said that tax now makes up an "astonishing" 80 per cent of the cost of a bottle of Scotch. Of an average bottle sold at £12.77, more than £10 goes straight to the Treasury, it said.

SWA figures show that on an average priced bottle of Scotch at £12.77, there will be excise duty of £8.05, VAT of £2.13, making a total tax £10.18, while the whisky is £2.59.

Now the industry is urging the Chancellor to cut excise duty on spirits to "protect the UK’s leading food and drink export" which supports 40,000 jobs.

The SWA has launched a Drop The Dram Duty campaign calling for fairer tax treatment to spirits in his November budget.

Karen Betts, Scotch Whisky Association chief executive, said: “Philip Hammond’s damaging 3.9% spirits duty hike has hit UK demand for Scotch and seen less money going to the Treasury.

“The Chancellor should use his November Budget to Drop The Dram Duty and boost a great British success story.

“Cutting tax would send a strong signal that the Government believes in a world-famous UK manufacturing industry which supports 40,000 jobs and plays a key role in Scotland’s economy.”

HM Revenue & Customs figures also show the tax take from spirits has actually fallen since the spring increase, which SWA says means less money for the Treasury.

Spirits revenue was down more than seven per cent in the first financial quarter of 2017/18 to £697 million from £751m in the same period from April to the end of June the previous year.

In contrast, a two per cent cut in 2015 saw spirits revenue rise by four per cent - giving a £124 million boost to the Treasury. And a freeze in 2016 led to a revenue increase of more than seven per cent, pouring an additional £229 million into the Chancellor’s coffers.

The Rare Whisky Apex 1000 index, tracking the value of 1,000 of the world's rarest whiskies, rose by 42 per cent between July 2016 and the end of July this year - and it has risen by 195 per cent over the past five years.

As of February some 14 new distilleries had opened since over four years with a further 40 new distilleries planned across Scotland, and seven were expected to open this year alone.

On Monday it emerged that the spirits of two "lost" distilleries that have been closed for 34 years are to be re-incarnated with a major investment.

Diageo, the world's largest spirits company is investing £35m in malt whisky facilities in Brora, Sutherland, and Port Ellen on Islay.

It means that the 'lost' distilleries, Port Ellen on the island of Islay and Brora on the east coast of Sutherland - will resume production in 2020.

A Treasury spokeswoman said: "We recognise the importance of the Scotch Whisky industry.

"In the UK, tax on a bottle of Scotch is 90p lower now than it would have otherwise been, thanks to duty freezes and cuts introduced in the last three years."