By Karen Betts, Chief Executive of the Scotch Whisky Association
IT’S tempting to think that these are uniquely challenging times. For the last three years, businesses have been working with the uncertainty caused by Brexit, and Scotch whisky producers, like businesses up and down the country, have been adapting and planning since the 2016 referendum.
How the UK leaves the EU will affect how we export and our plans must try to protect our businesses against sudden changes in the way we sell Scotch whisky to consumers overseas. This work has been complicated, and the industry has put a lot of resource into finding workable answers to the many questions around exporting post-Brexit.
These complications were compounded on October 18 when the United States Government imposed a 25 per cent tariff on imports of single malt Scotch whisky as a result of illegal subsidies given by the UK government to Airbus.
This tariff means that every bottle of single malt now pays an additional tax on entry into the US, charged at 25 per cent of its value. Scotch whisky companies will resist passing this new cost on to consumers for as long as they can; but many producers, particularly smaller ones, will not be able to do so for long and prices will rise. Distillers will be fighting to retain hard-won market share in the US against other, more competitively-priced, whiskies.
For our industry, and for Scottish shortbread and cashmere manufacturers now also subject to a tariff, the impact of global trade tensions is layered on top of Brexit.
This is serious, and government must take note. Yes, our industry is resilient and we have survived massive challenges in the past, not least through the 20th century’s wars, whose veterans we honoured earlier this week. But the industry and Scotland’s economy has changed enormously since then.
The Scotch whisky industry now directly employs more than 11,000 people in Scotland and a further 32,000 through our UK-wide supply chain, from farmers to hauliers and packaging companies. According to our data, sales of single malt in the US could fall by around 20 per cent, and the impact will be felt across Scotland’s economy. In that context, it is not enough for the industry to survive, it needs to thrive.
As MSPs gather today to debate the impact of tariffs on Scottish products, they need to be clear: first, that the tariff our companies are now paying will cost the industry around £100 million in its first year. Second, this is not our bill to pay: our industry had no role in the illegal subsidies at the heart of the dispute with the US, yet we are shouldering 62 per cent of the UK’s tariff burden.
So, while work continues to remove the tariff, the UK and Scottish governments must now commit to a package of support to help our industry, ensuring that we are not damaged in the longer term.
The industry needs support for the promotion of Scotch whisky in the US to mitigate the loss of market share that tariffs could impact. It needs further investment in infrastructure, the lack of which is holding us back: reliable broadband in rural areas is a serious issue for many of our member companies. Additional government support could also include scaling back new regulation while we manage the cost and complexity of both US tariffs and Brexit.
Not to support us, and quickly, would be a careless response to an industry that reflects Scotland’s history and culture, that supports communities the length and breadth of the country, and whose success is the envy of the world.
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