The Berry and Rudd families, owners of esteemed London wine merchant Berry Bros & Rudd, have raised concerns about recent inheritance tax reforms that could threaten the future of their 376-year-old business.
The Labor government’s proposed 50% reduction in tax exemption – which would allow family businesses to pass on assets tax-free – has left families grappling with the prospect of significant new costs.
Emma Fox, CEO of Berry Bros & Rudd, described the policy change as a ‘body blow’ to the family business. The company’s properties, valued at around £90 million, include its historic headquarters on Pall Mall, a huge fine wine storage facility in Kent and a 50% stake in the Hambledon Vineyard in Hampshire.
Emily Rae, the company’s CFO, emphasized the importance of the lighting, saying, “It’s something the families have relied on to keep the business in the family.” This shift has caused families to reconsider their long-term investment strategies, with potential changes to their balance sheets and future asset allocation.
Fox, a former director at Asda and Bass, warned that the changes to inheritance tax could hamper the company’s ability to make long-term investments, impacting the ‘patient capital’ approach that focuses on generational growth rather than on short-term returns. “This budget forces us to operate differently,” she added.
Berry Bros & Rudd’s concerns echo those of other British family businesses, with industry figures such as Sir James Dyson denouncing the policy as a “family death tax” that could stifle both established businesses and aspiring entrepreneurs.
Berry Bros & Rudd’s warnings coincide with the publication of its financial results for the year ending in March. The company reported a 50% fall in earnings before interest, tax, depreciation and amortization (EBITDA), to £10.1 million, and a pre-tax loss of £2.2 million. These declines reflect a challenging market landscape and substantial investment, including a £27 million commitment to expand operations.
The investments include a joint venture with port house Symington to acquire Hambledon Vineyard and a stake in the Cotswolds Distillery. However, the company has faced headwinds in its US operations. Hotaling, the San Francisco-based spirits importer that accounts for about 30% of the company’s sales, suffered a significant decline as spirits sales fell in the U.S. market following the pandemic.
Despite these challenges, Fox noted improvements in Hotaling’s performance over the past six months and expressed confidence in overtaking the competition as the US market recovers.
The wine merchant’s core business of retailing and storing fine wines remains robust, with single-digit growth in retail sales and a 25% increase in storage revenues, driven by collectors paying premiums for temperature-controlled wine storage. Berry Bros & Rudd recently completed its first fine wine auction as part of a bid to diversify its offering, while its events and entertainment division grew by 16%.
Lizzy Rudd, chairman of Berry Bros & Rudd, underlined the board’s commitment to the company’s sustainability and approved a dividend of £13.10 per share – an increase from 794p last year – reflecting the “sustainable underlying business growth” despite challenging conditions.