Nearly one in five (19%) of all of Scotland’s distilleries are facing financial distress amid a “perfect storm” of lower demand, higher production costs and new tariffs in key markets, according to new data from restructuring firm BTG.
In Scotland, 69 distillers – and a further 217 across England, Wales and Northern Ireland – were flagged by restructuring firm BTG’s Red Flag Alert’s credit risk scoring system as experiencing “significant” or “critical” financial issues in the three months to December 2025.
The number of Scottish distilleries in distress leapt by 40.8% (from 49 to 69) in the last three months of 2025, well ahead of the UK average rise of 12.2%. Year on year, the number of Scottish distillers in distress also climbed by 17%, ahead of the UK average rise of just 6.7%.
“Distilleries in Scotland, where the majority of the UK’s whisky production is based, are facing a perfect storm of lowering demand, rising production costs and increased tariffs in key markets,” said Thomas McKay, managing partner at BTG.
Globally, scotch whisky sales fell by 3% in the second half of 2025, according to ISWR. The downturn – which has caused suppliers including Diageo to halt production at a number of distilleries – was down to “a combination of changing consumer behaviours, rising operating costs and overheads, falling export sales and reduced consumer demand for alcohol,” BTG said.
Lockdown peak over
It was now clear demand for scotch, gin and other spirits had peaked during lockdowns in the UK and globally in 2020, McKay said.
“When this demand fell away, the remaining oversupply has seen prices fall, at exactly the same time as additional costs of exporting to the biggest market for scotch, the US, have risen dramatically,” he added.
Meanwhile, exports to China have also come under increased strain, falling 30% to £161m in 2024, according to data published by the Scotch Whisky Association. A recent deal to halve tariffs on exports to China could spark a recovery, but it is not clear when the levy reduction will come into force.
“Previously thriving businesses that have existed for generations are facing distress, often through no fault of their own, and there is a case for additional support to the sector to preserve the heritage of the Scottish whisky industry in unprecedented times,” said McKay. “This is especially clear when you consider that Scottish distilleries directly employ more than 10,000 people, well over half of the industry’s workforce in the UK.”
McKay’s comments echo those by The Whisky Exchange MD Natalie Tennent, who last month told The Grocer the whisky category was facing “a moment of correction” following a period in which prices were “pushed too high” amid inflated demand.
Red Flag Alert has been measuring corporate distress signals since 2004, drawing on company accounts and factual, legal and financial data.
Businesses with “significant” or “critical” financial issues have been identified by Red Flag Alert as experiencing “sustained or marked deterioration in key financial ratios and indicators” including their working capital, current and future liabilities, retained profits and net worth.
No comments yet