Norfolk gin industry continues to thrive but sector could be hit by tax hike

Simon Melton, owner of St Giles Distillery on North Walsham in Crostwick. Picture: Danielle Booden

Simon Melton, owner of St Giles Distillery on North Walsham in Crostwick. Picture: Danielle Booden - Credit: Archant

Norfolk has firmly established itself as a county of gin lovers with local firms revealing that online sales of the alcoholic drink increased during the pandemic.

However, fears were raised today that there could be trouble on the horizon as planned tax hikes could hit small distilleries.  

The gin industry has been helped financially by the Government during the pandemic, including a freeze on alcohol duty which lowers the amount of tax gin firms have to pay.  

During his budget announcement last autumn, the Chancellor revealed plans to simplify the Alcohol Duty system. This simplification will see higher-strength alcohol taxed at a higher rate than weaker strength drinks.  

Gins made at St Giles Distillery on North Walsham Road in Crostwick. Picture: Danielle Booden

Gins made at St Giles Distillery on North Walsham Road in Crostwick. Picture: Danielle Booden - Credit: Archant

But for the gin sector this would mean they have to pay a higher amount of tax on their products compared to that on weaker drinks such as wine or beer, which could particularly impact smaller gin distilleries.  

“Gin has been king for several years now,” said David Croft, regional account manager at Gyre & Gimble, a Norwich-based gin firm. “During the pandemic we have seen our web sales improve, although our trade sales fell due to lockdowns."

The brand also remains popular with locals with Mr Croft confirming that the largest proportion of its online customers come from the Norfolk area and that during the pandemic they saw sales in Norfolk increase.    

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Another Norfolk-based gin distillery that has seen success over the last few years is St Giles Gin. Simon Melton, co-owner of the Norwich-based firm, said: “During the pandemic we saw a decline in business of restaurant to restaurant, but we created a new line in business in online sales.  

“We now have customers all over the country from the Scottish islands to Cornwall. As one of the most awarded distilleries in the country we are recognised and people come to our website.  

“Pubs and hospitality businesses are still being very cautious but our sales have been very good."

This trend can be seen throughout the nation, as figures from the Office for National Statistics show that the number of UK gin distilleries grew by 110 over the last year. There are now 820 distillers in the UK, up from 710 in 2020 and 190 in 2015.  

Micro distilleries, which is defined as those with less than ten employees, make up 730 of all sites. This is up from 620 the previous year.  

St Giles Distillery on North Walsham Road in Crostwick. Picture: Danielle Booden

St Giles Distillery on North Walsham Road in Crostwick. Picture: Danielle Booden - Credit: Archant

And these are the ones that could be worst hit by planned tax changes, explained Mr Croft: “A rise in tax would have a massive impact on the business. We are doing really well on bottle sales and reducing tax would really help to improve our margin. We don’t just sell gin, but also have a gin academy and bar so it would help each aspect of our business.”   

Mr Melton agrees that a tax increase could have an impact.  

“It is very detrimental to local businesses and there isn’t that many genuine Norfolk distilleries,” he said. “Norfolk has some fantastic things to offer – fantastic products, fresh produce.  

“Putting higher taxes is detrimental to small businesses but helps big companies. They can absorb that cost. We have to either absorb it or pass it on to hotels and pubs.” 

The UK Spirits Alliance, which represents more than 260 members, is calling on the Treasury to make alcohol taxation a "level playing field". 

A spokesman for UK Spirits Alliance said: "It's fantastic that the number of UK spirits producers have boomed in the last year, in spite of the pandemic. The UK spirits industry provide billions every year to the Exchequer and is responsible for key innovations like carbon-negative gins. 

Gin being bottled at St Giles Distillery on North Walsham Road in Crostwick. Picture: Danielle Boode

Gin being bottled at St Giles Distillery on North Walsham Road in Crostwick. Picture: Danielle Booden - Credit: Archant

"But we need the Chancellor to support the industry as we look towards the review of alcohol duty, to build on the Prime Minister's Queen Speech commitment to 'support Scotch Whisky and Gin producers'. 

"This is a once in a generation chance to make the alcohol duty system fairer and more representative of modern drinking trends." 

What are the planned tax changes on alcohol?

During the Autumn Budget announced last year, the Chancellor revealed plans to take advantage of the regulatory and legislative flexibilities after leaving the EU to overhaul the centuries-old system of alcohol taxation. 

The aim of the changes are to make 'the regime fairer and more conducive to product innovation in response to evolving consumer tastes'. 

The plans include taxing alcohol in a progressive manner, which means that alcohol at a higher strength will have to pay more tax than alcohol at a lower strength.

Tax rates will set for products that sit within bands between 1.2-3.4pc ABV, 3.5-8.4pc ABV, 8.5-22pc ABV, and above 22pc ABV, with all products across all types of drinks categories paying the same rate of duty if they have the same proportion of alcohol content. 

For low strength drinks below 3.5% ABV the government will introduce new tax rates. 

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