What 2017 holds for Scotch

27 Dec 2016

As 2016 draws to a close, the Scotch Whisky Association (SWA) looks forward to the New Year when it will continue to work to maintain Scotch Whisky's place as the world's leading high-quality spirit drink. 

Please feel free to use any of this material as quotes from Julie Hesketh-Laird, SWA acting chief executive.

Scotch Whisky is an iconic industry and a vital part of the UK economy. It:

  • Supports 40,000 jobs across the UK
  • Adds value of £5 billion each year to the economy
  • Generates exports worth around £4 billion annually and is the largest net contributor to the UK's balance of trade in goods.

Brexit
The landmark vote in the middle of 2016 for the UK to leave the EU is one of the biggest changes to face the country for years. Scotch Whisky, like other industries, will undoubtedly face a number of opportunities and challenges as a result of this decision.
Since the vote in June, we have been analysing what Brexit will mean by consulting with members and talking to governments. As 2017 unfolds, Article 50 will be triggered and we will learn more about the UK Government's plans for exiting the UK.

Some things won't change for Scotch Whisky: we will not face a tariff on exports to EU because of WTO rules and we will continue to benefit from zero tariffs in other major markets, such as the USA, Canada and Mexico.  A high priority will remain 'grandfathering', or maintaining other benefits already secured - including lower tariffs and protection of the Scotch Whisky 'geographical indication' - through the existing network of EU trade deals. 
Looking ahead, the SWA wants the UK to have an open and ambitious trade policy, to put transitional arrangements in place that minimise trade disruption after Brexit, and to negotiate better global arrangements than we currently have. An even more trade-focused British embassy network around the world will be needed to make this happen.

We are hopeful the UK can secure favourable bilateral trade deals with key export markets.  India, for example, is a growing market for Scotch but exports are being held back by a 150% import tariff.   EU talks with India have proved challenging for a decade now and we hope the UK will now take a fresh approach to securing an ambitious trade agreement.
 
The UK should be a voice for open markets globally. The more open the market, the more Scotch Whisky exports will grow to the benefit of the wider economy.

UK market for Scotch
During this time of change, the SWA would like to see even more support for the strategically-important Scotch Whisky industry in its domestic market - the world's third biggest market for Scotch.

But, despite the scrapping of the alcohol duty escalator - the policy of increasing excise by inflation plus an additional two percent - in the 2014 Budget, a 2% cut in excise on spirits in 2015 and a freeze this year, the level of tax remains unfair and this issue should be addressed. The tax burden on an average priced bottle of Scotch is 77%*. More favourable tax treatment would support all parts of the Scotch Whisky industry and be fairer for consumers, whilst supporting higher tax revenues for government.**

Scotch Whisky suffers from one of the highest tax burdens of any UK-produced consumer good. At a time of uncertainty economic following the Brexit vote, it is vital that the UK government supports this industry of strategic importance to the UK economy and puts in place measures that promote investment and competitiveness.

Investment
Fairer tax would also support new entrants to the Scotch Whisky industry, as well as established companies who are investing in the UK. In that last couple of years more than 10 Scotch Whisky distilleries have opened across Scotland. At the same time, larger producers are investing in facilities, such as warehouses, visitor centres and expanding production. This trend is set to continue next year, but government support would help underpin future success.

Exports
Scotch Whisky exports of £4 billion make it of vital importance to the UK's economic performance.

In recent years, there has been a slowdown in exports due to some economic and political headwinds. We have started to see an improvement in performance.  Volume of Scotch Whisky exports was up by 3% in first half of year to 533 million bottles. While value was down slightly by 1% from £1.71bn to £1.7bn, this was much smaller than the 3% decline in first half of 2015. And, anecdotally, Scotch exports have received a boost from the weakness of Sterling since the Brexit vote.

Despite the uncertainty created by Brexit, we are optimistic that Scotch exports will be positive. Our 2016 figures will be published in the spring and this will give us a good indication of the direction of exports.

To sum up
Scotch Whisky is a highly successful industry, and the linchpin of many local economies.  It is an iconic product loved across the globe. While we are confident about the future of Scotch, there will be further challenges to address in 2017 and the SWA looks forward to working with government and others to support jobs and growth.  

Let's raise a dram of Scotch Whisky to 2017!

End

 

Notes to editors

* The 77% tax (vat and excise duty) is based on an average selling price of £12.80 for a 70cl bottle (as at September 2016) of Scotch Whisky in the off-trade in the UK. Of that, excise forms £7.75 and Vat forms £2.13 (Vat is charged twice on Scotch - on excise and on the final selling price). Therefore total tax on a bottle is £9.88.
**The most up-to-date official Treasury figures available show that in the 12 months to October 2016, spirits receipts were £3.212 billion - £101 million more (+3.25%) than the 12 months to October 2015 when receipts were £3.111bn.
SWA media contact: Rosemary Gallagher, head of communications, 0131 222 9230/07432 605385 or email rgallagher@swa.org.uk