Ever fancied investing in a small distillery? Well, you might not realise it but you already have. Through various regional development funds, taxpayers’ money has been pouring into the drinks sector. Ian Buxton takes a closer look at what we are getting for our hard-earned cash.
Do you, in economic terms, favour more of a New Keynesian approach to government expenditure or do you lean towards Ayn Rand’s Objectivist view? Or, to put this in terms more immediately relevant to a drinks blog, do you believe that new distillery start-ups should be funded with taxpayers’ (i.e. yours and mine) money? Perhaps you’ve never thought about it, or perhaps you didn’t know but across the UK many of the new boutique distilleries that have been springing up in recent years have benefited from the largesse of our public sector.
There are, of course, any number of ways of financing a distillery project. The promoters may be in the fortunate position of having all the necessary capital themselves in which case there’s no need for outside finance. Or they could seek angel investors, or borrow from a bank or other lender, or turn to crowdfunding. That’s been an increasingly popular route: from Burleigh’s Gin to Salcombe Distilling; Cotswolds to Glen Wyvis and Nc’nean to Sliabh Liag examples abound of enterprising entrepreneurs tapping a worldwide and growing community of drinks enthusiasts willing to back new distilling projects. And not just for small beer – some of these projects have raised over £1m from their backers, most of them hoping for a Sipsmith-style payday sometime in the future when the nascent brand attracts the greedy attention of an industry giant seeking some craft credibility.
But there’s another route open to the ambitious promoters of a new business, particularly in Scotland or some of England and Wales’ less prosperous areas. Here the secret is to find the relevant local economic development agency and plead your case for support. Their backing could come in the form of equity (i.e. a share of the business) or more probably a soft loan, outright grant or support for specialist consultants to help develop your business. There’s quite a lot of free money out there if you know where to look and if you don’t, an army of consultants are all too willing to help.
Unlike a venture capitalist, such an agency is not risking its own money. On the contrary, the business enterprise network is funded by the public purse; that’s to say from the taxes, on both income and consumption, which you (hopefully) have been paying, more or less willingly. Most, of course, pays for the schools, hospitals, roads, welfare system, defence and so on that we all rely on but a modest percentage finds its way to the enterprise agency network and a smaller part of that builds distilleries.
So what is the case that they can make for the cash? It’s hardly a capacity argument. The UK has more than adequate production volumes to make all the gin and whisky we need and it would be hard to argue a strategic requirement for making spirits – they’re hardly a coronavirus vaccine, tempting though the thought might be.
No, the magic words that unlock the loot appear to be job creation, tourism or exports – or, better still, a combination of all three. As their name suggests, development agencies are seeking to promote economic regeneration in their local area. Thus the boom in craft spirits and distillery tourism is seen as a lever to create sustainable businesses that attract visitors, creating employment for local people who spend their new wages locally, thus creating more employment in the immediate area. It’s a classic Keynsian multiplier effect and considerable numbers of new distilleries have benefited.
To take a few examples at random, Scottish Enterprise has put funding of various types into Isle of Harris Distillers, Nc’nean, The Clydeside Distillery, Holyrood Distillery and a number of others. The recently opened Annandale Distillery was helped to get off the ground with financial assistance from Historic Scotland and the Scottish Government through a Regional Selective Assistance grant and later enjoyed additional support from Interface, another agency funded by the public sector. As a leading Scottish accountancy practice Johnston Carmichael puts it, the “Scottish Government [is] very supportive, [via] Scotland Food & Drink [and] Scottish Enterprise Investor Ready assistance with business planning costs and other costs”. Their professional recommendation: “Max out on free money!” [That’s an actual quote from Johnston Carmichael.]
But the support doesn’t stop at Hadrian’s Wall. Situated in the Peak District National Park the tiny Forest Distillery were backed by Cheshire East Council’s Economic Development Service and went on to collect two separate double-gold medals at the San Francisco Spirit Awards. And from England’s south coast another example: a beneficiary of the Isle of Wight Rural Fund, HMS Victory Navy Strength Gin recently collected the ‘Best in Category International Navy Strength Gin’ accolade in the American Distilling Institute’s Spirit Competition.
However, it can be tough surviving in the global drinks industry and prospering is even more demanding. So, as it’s our money they’re handing out, let’s hope our civil servants are backing winners. Regardless of where you might place yourself on the political spectrum we can all drink to that!