IT should come as no surprise that the Scotch whisky industry is concerned about the possible impact of Brexit. Indeed, given the hugely positive contribution the industry makes to the Scottish economy, all of us should be concerned about the damage a precipitate and badly executed exit from the EU could cause. Scotch whisky is one of the crown jewels of the Scottish economy and Brexit represents a real threat to its continuing success.
The most recent figures provide a clear picture of what is at stake. Last year, Scotch whisky exports totalled £4.01bn, four per cent up on 2015. Single malt exports are also doing extremely well, up 12 per cent on 2015 to £1.02bn last year. Taken as a whole, Scotch was also the biggest net contributor to the UK’s balance of trade in goods. The Scottish Whisky Association calculates that, without Scotch, the UK’s global deficit on trade in goods in 2016 would have been 2.8 per cent wider at £139bn. That is an awful lot of success to lose.
However, Brexit represents a threat to that success on a number of fronts – the first of which is to the industry’s relationship with other EU nations. European markets are hugely important for the industry (France is the biggest overseas market for Scotch by volume), and only a Brexit deal that retains as open a trade policy as possible can protect some of this success.
Another significant threat is to the legal protection that Scotch enjoys in the UK, EU and around the world. Currently, any drink described as Scotch whisky must meet strict criteria including country of origin – it must be from Scotland – and the rules protecting this status are set at EU level. The potential threat after Brexit is that the UK will not be able to protect this status in some markets, particularly in the US where the Government has already indicated that they would like a relaxation of the rules.
Scotland’s economy secretary Keith Brown has now raised this issue in the wake of UK international trade secretary Liam Fox’s visit to the US last week for trade talks and he was right to do so. Mr Brown is demanding that the current EU definition of whisky be applied into UK law after Brexit and his reasons are sound: any relaxation of the rules could allow cheaper products calling themselves Scotch whisky to be sold in the UK, thereby damaging the indigenous industry.
The UK Government may yet be able to strike a good deal with the US and certainly the importance of doing so cannot be exaggerated – the US is Scotch whisky’s biggest overseas market by value. Scotch has also been showing great growth in the US, leaping 14.2 per cent to £856m last year.
However, it is the weight and power of the EU as a single block that has helped the Scotch whisky industry achieve the fair access it has needed to grow and that fair access is now clearly under threat. Both the US and UK governments keep trumpeting the potential benefits of the post-Brexit trade deals. But any deal cannot allow the current robust protections that Scotch whisky enjoys to be watered down.
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