BREAKING POINT

Blair Bowman examines some of the possible repercussions of Brexit for the Scotch whisky industry

Blair Bowman quizzes the Scotch whisky industry on the possible effects of Brexit

As Scotland’s premier export industry, no sector of the economy has more skin in the game when it comes to the ongoing omnishambles known as Brexit than whisky distillers. With ‘B-Day’ on 29 March now getting uncomfortably close, purveyors of the amber nectar could be forgiven for having a monumental attack of the jitters given the uncertainty surrounding future trading relations with whisky’s biggest overseas market.

One company with a pan-European outlook is Glasgow-based Edrington-Beam Suntory UK, who distribute Famous Grouse and Macallan but also Courvoisier Cognac from France. They have confirmed that they are stockpiling six months’ worth of Courvoisier so that their UK supply chain of bars and supermarkets remains uninterrupted in the event of a no-deal Brexit.

I wonder whether importers in France, Spain, Germany and other key EU markets for Scotch whisky are stockpiling Scotch in similar fashion? Given how much Scotch whisky is imported into the EU, this is important. France, for instance, has been the largest importer of Scotch whisky in the world for a number of years, importing some 180 million bottles in 2017. After that, however, the next biggest markets are outwith the EU – the USA is second with 130 million bottles and India is third with 90 million.

The Scotch Whisky Association are certainly concerned by the possible impact of Brexit on European trade deals, and especially the possibility of a no-deal departure. But with Parliamentary deadlock appearing to increase the chances of such a scenario, it is easy to see why the whisky industry is so worried. As with other Geographical Indicators products like Stilton cheese or Stornoway black pudding, the EU has been a key guarantor of provenance. From an intellectual property standpoint this is fundamental to protecting Scotch whisky’s market, especially within the EU.

There are also other incidentals to consider, such as whether distilleries will be able to retain existing expertise from EU workers, and whether raw materials could be subject to tariffs. There seems to be no end to the imponderables – at the moment the falling pound means raw materials are more expensive but it also makes Scotch less expensive to EU consumers, boosting sales and profits.

A huge amount of time, energy and money is already being invested in mitigating a no-deal Brexit, which the SWA estimates could cost the whisky industry £53 million a year in additional export duties into countries with which the EU has a trade deal but the UK currently doesn’t. As well as financial, there are also logistical concerns. A no-deal Brexit, for instance, could mean that different labels are needed on Scotch whisky – one for the UK and one for the EU. One small to medium sized enterprise in the whisky industry estimated this could cost them around £1.5 million a year in additional costs.

But leaving the EU could open up other markets. The Trans-Pacific Partnership (TPP) of 11 countries in the Pacific rim offers a large glimmer of hope. If the UK was to join the TPP it could boost exports of whisky to Australia, Japan, Singapore and other countries in the trade agreement. As the countries in the agreement currently represent only 18% of whisky export markets, thanks in part to tariffs that would disappear if we were to join the TPP, it is certainly a promising opportunity in a no-deal Brexit.

A final – and very surprising – piece of news to emerge from Westminster is the fact that the UK Government Wine Cellar, which covers consumption of booze in the Houses of Parliament, report that only one bottle of whisky was consumed in 2017-2018, compared to 1,424 bottles of wine (of which over 600 were English wine), 28 bottles of gin and two bottles of cognac.

On closer inspection, it appears that the Members of Parliament didn’t even finish a full bottle, with the appendix noting that only half a bottle of Johnnie Walker Black Label and half a bottle of Caol Ila 18-year-old were consumed. Given the excesses of the expenses scandal and the well-known thirst of our MPs, I am surprised by this, although in fairness our elected representatives have been making some strange choices lately…

On a lighter note, a distillery in Austria has created a Brexit Whisky, made from a combination of corn, rye, barley, wheat and spelt, highlighting the synergy of different grains working together and shunning the idea of a single malt made solely from malted barley. I haven’t tasted it yet, but it’s an interesting idea regardless of the outcome of Brexit.

“A no-deal Brexit could cost the whisky industry £53 million a year in additional export duties