Business has always learned to cope with pressures of taxes and tariffs

Summer sun may be on its way, but I fear dark clouds dominate the weather forecast for businesses if any of the current surveys about confidence are to be believed. Increased taxation at home and an uncertain tariff war abroad make for turbulent times.

But there are occasions when history can offer some crumbs of comfort. Let’s take the tea market as an example, which played such an important part in putting Bath on the tourist map, from which it has never left.

Politicians spotted the opportunity of raising money from tea drinkers as early as 1689, but their first stab at setting a rate of 25p in the pound, was so high that it almost stopped sales in their tracks. Within three years it had been reduced to 5p, which gives some hope that rates can come down as well as up when the economic effects are properly understood.

One of the consequences of the high taxation of tea was the growth in methods to avoid paying it, so there was a huge expansion in smuggling, and what began as a small-time illegal trade, selling a few pounds of tea to personal contacts, developed by the late eighteenth century into an organised crime network which imported more tea into the country than was coming in through legal means, shades of today’s smuggling of cigarettes.  

By 1784, the government realised heavy taxation was creating more problems than it was worth and Prime Minister, William Pitt the Younger, slashed the tax from 119% to 12.5%. Legal tea was affordable, and guess what, smuggling stopped virtually overnight.

It’s interesting that two countries, much in the news in current trade matters, were earlier in competition when it came to tea. Before 1834, China was the source of the vast majority of tea coming here, but the end of a monopoly previously enjoyed by the East India Company, meant they began growing tea in India with a view to importing it. Production expanded at such a rate that by 1888, British tea imports from India exceeded those from China for the first time.

To give you a sense of how big the tea market was, in 1784, according to Jessica Hope, writing in the Bath Magazine in 2017, there were no fewer than 672 tea dealers registered in Bath and Bristol, that was around a third of all shopkeepers.

So what does this have to do with what’s happening in Bath today ? Well, I think it shows that business people have always been resilient and find ways of coping with whatever Governments throw at them, that they work out how to serve the interests of their customers and adapt to changing circumstances. Tea traders managed it and I have no doubt current businesses will do the same. Let’s drink to that !