Euro crisis hitting exports, with flagship whisky sales suffering

EUROPE’S debt crisis and a shock fall in overseas food and drink sales led to a drop in Scotland’s manufactured exports in the opening three months of the year, prompting business leaders to call for “fairer” taxes and regulations for the key drinks industry.

Food and drink exports fell by 2.9 per cent during the first quarter as they came up against a strong comparison with the first three months of 2011.

The surprise fall – which flies in the face of a raft of distillers reporting rising demand for whisky in overseas markets – triggered a 0.6 per cent drop in overall manufactured exports. In the past four quarters, exports grew by 4.2 per cent.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, warned: “It seems apparent that much of the fall was due to a weakness in drinks exports and this should underline the need to ensure that our drinks industry is valued and treated fairly by government, especially in terms of taxation and regulation.”

Finance secretary John Swinney defended the drinks sector, arguing it had performed well in the past four quarters.

He said: “Taken over the year, manufactured exports in Scotland have grown strongly, with growth of 8.8 per cent in the food and drink sector making the largest contribution to the total.

“However, there has been a slowdown over the past two quarters. This reflects the on-going economic uncertainty in the eurozone and a less competitive exchange rate. It is also further evidence that the UK government’s austerity approach is failing and, yet again, I am urging Westminster to invest now to promote economic growth.”

A spokeswoman for the Scotch Whisky Association (SWA) moved to calm nerves, pointing out that first-quarter exports can often be lower if customers have stocked up ahead of Christmas. She said the SWA’s own figures showed exports were down around 2 per cent during the first quarter but were up about 14 per cent over the past 12 months. She added: “We don’t read too much into monthly or quarterly figures because they can vary a lot.”

Duncan Irvine, head of corporate banking at Barclays Scotland, said the surprise drop in food and drink exports showed how “unpredictable the current exporting climate is”. He added: “Confidence will continue to be a major barrier, not helped by the recent contraction of the UK and US manufacturing sectors and less than flattering economic predictions of stagnation for Scotland.

“With the ongoing impact on demand from the eurozone crisis, savvy Scots exporters will be aggressively pursuing untapped markets to drive growth and minimise risk.”

CBI Scotland director Iain McMillan argued “the elimination of the public spending deficit and subsequent reduction of the ever-expanding national debt must not be compromised” but said Holyrood could take steps to help.

McMillan said: “There is plenty the Scottish Government can do to invest in infrastructure and assist firms in winning new business overseas, for example by providing pump-prime funding to help establish more direct air connections to key overseas business destinations and hubs.”