Growing numbers of Scottish spirits producers are showing signs of financial strain as weakening export demand, rising costs and trade barriers squeeze margins across the sector.
Research by restructuring specialist BTG Begbies Traynor found that 69 Scottish distillers were facing “significant” or “critical” financial distress at the end of the year, up from 49 in the previous quarter.
According to the Scotch Whisky Association, Scotland is home to more than 150 whisky distilleries, alongside more than 90 producing gin and a smaller number making vodka, rum and liqueurs.
Thomas McKay, managing partner of BTG in Scotland, said producers were facing a “perfect storm of lowering demand, rising production costs and increased tariffs in key markets”.
Exports to the United States and China, two of Scotch whisky’s most important markets, have been dented by tariffs and duties, while domestic trends have also shifted.
Several UK pub groups have reported that customers are increasingly trading down from spirits to cheaper alternatives such as beer or soft drinks. At the same time, broader societal changes, including declining alcohol consumption among younger consumers, have weighed on volumes.
McKay noted that demand for Scotch whisky and gin peaked during the pandemic in 2020, when lockdown consumption surged both in the UK and internationally.
“When that demand fell away, the resulting oversupply pushed prices down, just as additional export costs to the US began to rise sharply,” he said.
Distillers have also been hit by steep increases in energy and labour costs over the past two years, further eroding profitability.
The challenges have already prompted retrenchment. Last month, craft brewer BrewDog announced plans to close its distillery and spirits arm, underscoring the pressure across the wider drinks sector.
The strain is not confined to Scotland. Export volumes of French wine and spirits fell last year to their lowest level in 25 years.
Industry body FEVS said shipments dropped 3 per cent year-on-year to 168 million cases, the weakest performance since the turn of the century. The value of sales declined 8 per cent to €14.3 billion, the poorest showing on that measure for five years.
Tariffs imposed by the United States under President Trump, as well as duties in China, were cited as key headwinds.
Gabriel Picard, chairman of FEVS, said that new trade agreements between the European Union and India, as well as Mercosur countries in South America, could help support exports in the year ahead. However, he warned that sales of cognac and wine to the US and China could deteriorate further.
For Scotland’s distillers, the coming year is likely to test resilience. With costs elevated, export markets volatile and domestic consumers tightening belts, the industry that has long been one of Britain’s flagship exporters is confronting one of its most challenging trading environments in decades.
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Tariffs and falling demand leave Scotch distillers under pressure