Brexit to hurt scotch sales?

Falkirk – Scotch whisky makers were among the most fervent industry advocates for staying in the European Union but if Britain has to leave, they prefer a clean break.

The industry, already busy preparing for transport and logistical challenges, says it would be happy to stay in the EU single market and the customs union after Britain leaves the trading bloc – if it had a say in regulations and a right to make bilateral trade deals.

If that’s not possible, then it would be better to have no deal and default to World Trade Organisation rules, which mandate a zero percent tariff on scotch imports into the EU, said Karen Betts, CEO of the Scotch Whisky Association. “There are real risks if you stay in the single market or continue to be bound by the EU rules, but are not able to influence them,” she said.

The industry position matters: scotch exports were worth £4.36 billion (R71 billion) in 2017, more than one-fifth of all of Britain’s food and drink exports and 40 000 jobs.

To some extent, its position is unique. There’s the advantageous tariffs under the WTO and while its supply chain is almost all UKbased, exports account for 90% of output, meaning it has seen big benefits from the post-Brexit weakness in the pound.

Protected by a UK law which means it can only be made in Scotland, Scotch is dominated by multinationals like Diageo and Pernod Ricard. Distillers are skilled in cross-border trade and able to absorb logistical challenges and extra costs.

What the industry wants now is clarity about the terms under which Britain will leave the EU and how much time it has to prepare.

A big concern, shared by other goods exporters, is how transport to the EU will be affected by a change in IT systems for trade with nonEU countries agreed before the Brexit vote.

If the agreed transition is not long enough following Brexit Day on March 29, 2019, the system may have to be used for all exports, including to the EU, just months after it has been introduced. The volume of declarations processed annually in that case will rise to 255 million from 55 million, the government says, so it must be glitch-free by then.

Whisky makers have plans for alternative routes and storage in case border delays affect sales or costs. – Reuters