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London gin threatened by ‘toxic mix’ of rocketing production costs and alcohol tax

 (Getty Images)
(Getty Images)

The majority of Britain’s small spirit distillers could be forced out of business in the coming year, producers warned on Friday.

Distilleries that make the London Dry Gin famous around the world have said a “toxic mix” of rocketing production costs and high duty rates is threatening the industry.

Just under half of small companies said they have already been forced to lay off staff in the last 12 months as they deal with rising energy and ingredient prices.

A staggering 80 per cent of the 30 spirits distillers surveyed by the UK Spirits Alliance (UKSA) last month said they may be forced to close their business in the coming year.

Tax on spirits is frozen until August 1 and businesses warned Chancellor Jeremy Hunt that it could be a final blow to some smaller distillers if he presses ahead with a threatened alcohol duty hike in his budget next week.

Hilary Whitney, who co-founded Sacred Spirits in Highgate with Ian Hart, said: “The growth of craft distillers in Britain has been a national success story in recent years but a whole industry is at risk of going under due to a mix of rising costs and high levels of duty.

“With small distillers providing jobs, boosting local economies and supporting our beleaguered hospitality sector, we are calling on the Chancellor to back a flagship national industry in the budget by extending the spirits duty freeze beyond August 1.”

Excise duty on spirits in the UK is 70 per cent of the cost of a bottle - the highest in the G7 countries.

Last year the average price of a gin and tonic in a London pub hit almost £10 as companies grappled with rising costs, soaring inflation and a tax on higher strength alcohol.

UK Hospitality predicted prices across would go up another 11 per cent this year.

Many distillers said they have been forced to pass on some of the rising costs to hard-pressed consumers with more than half of those responding to UKSA’s survey saying they had hiked prices by up to 10 per cent already.

A UKSA spokesman said: “The future of our home-grown spirits industry is under threat. We are astonished to learn that 80 per cent of small distillers are worried that they will even be in business this time next year, putting jobs and livelihoods at risk.

“With 70 per cent of the cost of a bottle of spirits going to the Exchequer, we urge Jeremy Hunt to freeze spirits duty after August 1 to give small distillers breathing space as the Government delivers on its pledges to lower inflation and tackle high energy costs.”

Stephen Russell of Copper Rivet distillery in Chatham, Kent added: “The growth of craft distillers in Britain has been a national success story in recent years but a whole industry is at risk of going under due to a mix of rising costs and high levels of duty.”

Last year then Chancellor Rishi Sunak vowed to help pubs and hospitality businesses through rate relief.

He announced a half price discount on business rates bill, up to £110,000, saving a typical pub £5,000.