Newswatch - Producers say free the spirit

Scotch whisky producer Glenmorangie is this week expected to reveal pre-tax profits mirroring last year’s results, but the headline figures hide a turbulent year for the distiller.

Glenmorangie and other spirit manufacturers were disappointed by the chancellor’s decision not to reduce taxes on spirits in the Budget. Unless a programme of duty cuts is put in place, reducing ‘tax discrimination’ against Scotch over a series of Budgets, whisky producers fear there will be no progress in eliminating what the industry terms the ‘unjustified’ tax regime.

In March, the Glenmorangie group issued a shock profits warning after finding its UK sales operation had been shipping excess cases of whisky to boost sales performance. The group said it expected profits to fall £1.1m as management would hold UK shipments.

City analysts now predict that Glenmorangie will report full-year profits of £8.68m, compared to last year’s £8.4m pre-tax profits.

Scotch Whisky is an important export industry, generating sales of £2bn a year and supporting about 60,000 jobs. But the fact that 90% of the product is sold abroad also makes the industry vulnerable to overseas economic conditions such as the recent Asian crisis.

Whisky makers nursed a costly hangover during the Asian slump, when drinkers throughout the Far East turned to drowning their sorrows in cheaper Japanese whisky instead of Scotch.

Now producers fear long-term damage to the industry, aggravated by reduced sales at home as British shoppers are encouraged in their habit of travelling to France, where spirit taxes are lower.