Berry Bros & Rudd families warn inheritance tax changes threaten legacy of historic wine business

The Berry and Rudd families, owners of prestigious London wine merchant Berry Bros & Rudd, have raised concerns about recent inheritance tax reforms which could threaten the future of their 376-year-old business.

The Labor government’s proposed 50% cut in commercial property relief – which allows family-owned businesses to pass on their assets tax-free – has left families grappling with the prospect of significant new costs.

Emma Fox, chief executive of Berry Bros & Rudd, described the policy change as a “huge blow” to the family-run organisation. The company’s real estate holdings, worth around £90 million, include its historic headquarters in Pall Mall, an extensive fine wine storage facility in Kent, and a 50% stake in Hambledon Vineyard in Hampshire.

Emily Ray, the company’s chief financial officer, highlighted the importance of the relief, saying: “It’s something families have relied on to keep the company in the family.” This shift has prompted families to reconsider their long-term investment strategies, with potential changes to their balance sheet and asset allocation in the future.

Fox, a former Asda and Bass executive, warned that changes to inheritance tax could hamper the company’s ability to make long-term investments, affecting a “patient capital” approach that focuses on generational growth rather than short-term returns. She added: “This budget forces us to work differently.”

Berry Bros & Rudd’s concerns mirror those of other family businesses in the UK, where industry figures such as Sir James Dyson have condemned the policy as a “family death tax” that could discourage existing businesses and aspiring entrepreneurs.

The warnings issued by Berry Bros & Rudd coincide with the release of its financial results for the year ending March. The company reported a 50% fall in its 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 significant investment, including a £27 million commitment to expand its operations.

Investments included a joint venture with Port House Symington to acquire Hambledon Vineyard and a stake in the Cotswolds Distillery. However, the company faced headwinds in its US operations. Hotaling, the San Francisco-based spirits importer, which contributes about 30% of the company’s revenue, has seen a significant decline as spirits sales declined post-pandemic across the U.S. market.

Despite these challenges, Fox noted the improvement in Hotaling’s performance over the past six months and expressed confidence in outperforming competitors as the US market rebounds.

The wine merchant’s core business of retailing and warehousing fine wine remains strong, with single-digit growth in retail and a 25% increase in warehousing revenue, driven by collectors paying premiums to store temperature-controlled wines. Berry Bros & Rudd recently completed its first fine wine auction as part of its efforts to diversify its offering, while its events and entertainment division achieved 16% growth.

Lizzie Rudd, chair of Berry Bros & Rudd, reiterated the board’s commitment to the sustainability of the business, agreeing to pay a dividend of £13.10 per share – up from 794p last year – reflecting “sustained underlying growth in the business” despite the circumstances. The difficult one.