Production slowdown and a call for review of ‘super tax’ - how whisky industry strife might affect future

The ongoing travails of the whisky industry have been widely reported within the last year alone. Donald Trump’s tariffs, the increased UK spirits duty and a fall in consumer demand have left those in the industry ‘struggling for optimism'.

Last year, 1,000 jobs were lost in the sector as it navigates a 17 per cent rise in excise duty over the past three years, the US president’s 10 per cent tariff and falling global demand. These market conditions have led to redundancies in Scotland at distilleries and closures of visitor centres, as well as widespread reduction in production.

This reduction in production is a knock-on effect of the global pressures, but new research shows that the Scotch whisky industry reached its peak in 2023 - the same year the UK government increased spirits duty to 17 per cent.

Writing in their Commercial Spirits Intelligence Substack, Duncan McFadzean, head of food and drink at Noble & Co. and whisky expert Martin Purvis, looked at the reduction in whisky spirit production across Scotland and what this means for the wider supply chain across the country.

The findings show that, over the last 20 years, Scotch whisky has been in growth in terms of how much it is producing. Now, following this period of expansion, things are being scaled back due to a build up of maturing stock, and a decrease in demand.

Mr McFadzean and Mr Purvis wrote: “The post-COVID cycle has seen the dawn of realisation that capacity far exceeds current demand and over the last 18 months we have detected a decline in output from the industry and 2026 has seen a marked slowdown in output and rationalisation of operational capability. This is painful for farmers, merchants, maltsters, and distillers alike.”

While the impacts are being felt now, with job losses and some closures, what’s the likely future impact?

Given how much liquid is maturing in warehouses, it’s likely that this will not be diminished due to the ongoing decrease in demand. “For inventory to fall to more manageable levels the industry needs to see a return to case goods growth, or a further reduction in production,” explained Mr McFadzean and Mr Purvis. “If both occurred simultaneously then maturing stock levels will rapidly fall back to a more sensible long-term glide path. As a supplier to the distilling trade, we watch with hope to see how this evolves in the coming months.

“Malt whisky output has fallen most over the last year and is due in part to the many operators who are all operating independently. New players have no choice but to lay down stock for the medium and long term without current sales – natural and necessary inventory build-up. Will these players be successful and will they cannibalise existing malt whisky products? Only time will tell.”

While some brands are recalling the Whisky Loch of the 1980s and how a reduction in production lead to scarcity, there’s no real comparison to the situation today. In the 1980s brown spirits went out of fashion - now it’s price rises and the cost of living meaning consumers are less able to afford these luxuries. Not to mention the sheer amount of whisky in the market.

Mark Littler, Spears 500 whisky advisor, rare cask broker said of this: “There’s some truth in the idea that lower production today can tighten supply in the future, but it’s being overstated.

“What we’re seeing now is more about current market conditions. With bottle sales having been under pressure since the middle of 2022, some larger players and producers are offloading casks into the industry to generate cash flow, which has increased supply and softened prices.

“That does create opportunity for buyers, but it’s important to be clear—this is not a fundamentally ‘better’ time to buy, just a cheaper one. The risk is that this narrative is used as a sales tool, and because pricing is so opaque, those softer prices aren’t always passed on to buyers."

This report, and its highlighting of the 2023 peak, come in the same week as the Scotch Whisky Association and a coalition of eight spirits industry representative organisations across the UK released a joint statement on UK spirits duty revenue; as the Government evaluates the impacts of the alcohol duty reforms which rose in that same year.

The statement reads: "The Government’s own data shows that UK spirits producers, our supply chains and consumers across the country, can see the devastating impact of the 17 per cent increase to spirits duty over the last three years. Spirits revenue has fallen by £94m in 2025/26, and revenue is £1.1bn lower than was forecast when the new alcohol duty system was introduced in 2023.

“It is critical that HM Treasury do not turn a blind eye to the role the punitive and distortive duty rate has had on spirits revenue, in addition to job losses and investment pauses across the spirits industry.

“Spirits duty amounts to a super tax on the industry and must be urgently addressed. Pubs and the wider hospitality industry cannot survive on beer alone, yet hard pressed consumers are being forced to pay over the odds to responsibly enjoy premium spirits, which underpin the profitability of many bars, pubs and restaurants.

“HM Treasury promised a review of the new alcohol duty system three years after its implementation. We welcome the launch of that evaluation, and our organisations are united in our call for the review to be as comprehensive as possible, and for the Autumn Budget to take steps to support the UK’s worldclass spirits industry.”

Despite all the doom and gloom, the Scotch whisky industry exported £5.4bn last year, as Graeme Littlejohn, director of strategy and communications at the Scotch Whisky Association outlined, saying: “Scotch Whisky continues to be a strategically important industry for the Scottish and wider UK economy.

“The global reach of the industry, with £5.4bn exported last year, brings jobs and investment to communities closer to home, and supports a domestic supply chain.

“As one of the most economically productive sectors in the UK, the Scotch Whisky industry should be nurtured and not taken for granted.

“With government support to reduce the tax burden, boost global trade and invest in sustainability, the Scotch Whisky industry can continue to drive economic growth for centuries to come.”