U.K. spirits production fell 29.2% in the April-to-June quarter

U.K. spirits production fell sharply in the April-to-June quarter, while the amount of spirits cleared for duty changed little, according to updated HM Revenue and Customs data that point to a growing gap between what distillers made and what was released into the taxed market.

HMRC’s latest Alcohol Bulletin shows that U.K. spirits production dropped to 111.71 million liters of pure alcohol in April through June, down from 157.88 million liters in the same period a year earlier. That was a decline of 46.17 million liters, or 29.2%.

Over the same quarter, spirits clearances fell much less. HMRC recorded 29.21 million liters of pure alcohol cleared, compared with 29.53 million liters a year earlier. That was a decrease of about 315,000 liters, or 1.1%.

The difference matters because production and clearances measure different parts of the market. Production tracks what is made in the United Kingdom. Clearances reflect alcohol on which duty becomes payable when it is removed from warehouse storage or otherwise released into the market. HMRC says clearances do not equal retail sales and may include imported products as well as goods drawn from inventories.

That means the weaker production numbers do not automatically translate into the same drop in taxed volumes reaching the market. The figures suggest that supply may have been supported by stock already held in warehouses, by a greater role for imports, or by a deliberate reduction in domestic output. HMRC did not assign a cause in the bulletin, and it said the April-to-June production and clearance figures are provisional.

Tax receipts moved in the opposite direction. HMRC said spirits duty receipts for the April-to-June quarter rose to £907 million from £873 million a year earlier, an increase of £34 million, or 4%. The gain in receipts came even though clearances were nearly flat, showing that revenue can move for reasons beyond volume alone.

HMRC notes that Alcohol Duty receipts are reported by the month the payments are received, not the month the liabilities were created. Traders generally pay duty in the month after liabilities accrue, creating a one-month lag. Receipts can also be affected by changes in prices, alcohol strength, and tax rates, not only by the volume of spirits released for duty.

On a financial-year-to-date basis, the spirits duty take was almost unchanged. From April through July, receipts totaled £1.163 billion, compared with £1.164 billion in the same period of the previous financial year, a drop of £1 million, or less than 1%.

The new bulletin provides a broader picture of alcohol tax revenue in the United Kingdom. Total Alcohol Duty receipts in the April-to-June quarter were £2.936 billion, up £22 million, or 1%, from a year earlier. Wine, other fermented products, and cider brought in £1.153 billion, up £32 million, or 3%. Beer receipts fell to £876 million, down £45 million, or 5%.

For the April-to-July period, total Alcohol Duty receipts stood at £3.889 billion, compared with £3.886 billion a year earlier. HMRC said wine, other fermented products, and cider accounted for 40% of that total, while spirits and beer each represented 30%.

The bulletin comes under the post-August 2023 alcohol duty system, which taxes products by liters of pure alcohol. HMRC said the tables in the release cover only the new regime. It also warned that some wine, other fermented products, and cider receipts from April 2023 onward are still undergoing assurance work, though total alcohol duty figures are not affected.

For spirits producers, the most notable signal in the new release is the size of the production decline relative to market clearances. A fall of nearly one-third in output would normally be expected to feed more visibly into the volume released for duty. Instead, clearances were almost steady, and receipts rose in the quarter.

That divergence may reflect a drawdown of inventories built earlier, changes in the timing of removals from bonded warehouses, or a larger share of imported spirits entering the taxed market. Because HMRC’s spirits duty rules apply not only to U.K.-made spirits but also to imported spirits and mixtures once duty becomes payable, the clearance data capture more than just domestic distilling activity.

The quarterly monthly breakdown of spirits receipts also showed a mixed pattern. Receipts were £277 million in April, £330 million in May, and £299 million in June. In the same months a year earlier, they were £269 million, £209 million, and £395 million. July receipts then fell to £256 million from £291 million a year earlier, leaving the year-to-date total broadly flat despite the quarterly increase.

HMRC publishes the Alcohol Bulletin as accredited official statistics covering wine, spirits, beer, and cider at the U.K. level. The agency said the next release is scheduled for November.