Duty escalator depresses sales of Scotch Whisky in its home market

30 Apr 2013

Scotch Whisky sales have declined by 12% in the UK over the last five years since the introduction of the alcohol duty escalator.

UK sales volume has dropped from 102 million 70 cl bottles of Scotch Whisky a year in 2007 to 90 million bottles in 2012. At its annual general meeting in Edinburgh yesterday, Scotch Whisky Association (SWA) members discussed the negative impact of the duty escalator and the tax treatment of Scotch Whisky by the UK government.

The duty escalator was introduced in March 2008 by then-Chancellor Alistair Darling, with duty being increased by 2% above the rate of inflation each year. The exception was this year's Budget when the duty escalator was removed from beer and the beer duty was cut. As a result, drinkers of a dram are now paying 48% more duty than a beer drinker, distorting the alcoholic drinks market in the UK. The SWA described last month's Budget decision by Chancellor George Osborne as "an unfair and incomprehensible blow to Scotch Whisky".

Industry members expressed concern that calls for an end to the duty escalator on Scotch have been dismissed by claims that UK tax does not hamper the industry as it sales are primarily overseas.  The UK, however, remains the third most important market for Scotch Whisky producers, accounting for 7% of global sales volumes. Some 80% of UK sales are south of the border.

The SWA is calling for the duty escalator on Scotch Whisky to be scrapped to support, rather than penalise, the industry which boosts the UK economy. The industry supports 35,000 jobs across the UK, many in economically challenged areas.

Gavin Hewitt, chief executive of the Scotch Whisky Association, said:

"Scotch Whisky can only be made in Scotland and is vital to the UK and Scottish economies. It is time the UK Government started treating the industry more fairly in its domestic market. The duty escalator penalises ordinary people at a time of economic pressure, increases the inflation burden, depresses the industry when the Government says it wants to stimulate economic growth and sets an unwelcome tax precedent for other governments to follow in taxing Scotch Whisky exorbitantly. 

"There is no justification for spirits being taxed more heavily than beer. After more than half a decade, the Government should review the duty escalator rather than maintain the mantra that it should run for the remainder of this Parliament.  The escalator will further depress the volume of sales of Scotch Whisky in the UK."

The 5.3% increase in spirits duty in this year's Budget led to a 47 pence rise in the average price of a standard 70cl bottle of Scotch Whisky from £12.42 to £12.89. Total tax, including VAT and excise duty, now accounts for 80% of the price of a bottle of Scotch Whisky in the UK.

Of the European Union members states only Ireland, Finland and Sweden have higher taxation on spirits than the UK.

In the five years to 2012 the volume of Scotch Whisky exports has increased by 10% from 1.1 to 1.2 billion bottles a year. Such success overseas in contrast to a decline in sales in the UK shows the detrimental impact of government policies on the domestic market.

Notes to editors

For further information please contact Rosemary Gallagher, SWA communications manager on 0131 222 9230/0743 260 5385 email rgallagher@swa.org.uk or Campbell Evans on 0131 222 0231/07768 002 262 or email cevans@swa.org.uk


Twitter @ScotchWhiskySWA