Free trade key to Scotch whisky success, says industry body

Whisky exports are worth £4bn, but what about the wider role it plays in Scotland's economy?

Karen Betts - Chief Executive at the Scotch Whisky Association, 21/06/2017. Photography for the Scotch Whisky Association (SWA) from Colin Hattersley Photography - www.colinhattersley.com - [email protected] - 07974 957 388.

Scotch whisky is big business. Generating £4 billion in exports, it is the single largest net contributor to the United Kingdom’s balance of trade in goods, and with Scotch making up around 73 per cent of Scottish food and drink exports, it’s certainly an industry of significant strategic importance.

Year on year, figures from the Scotch Whisky Association (SWA) show growth across the industry and with new distilleries either already open or in the pipeline, it’s an area that is seeing a lot of investment.

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The quality and provenance associated with Scotch whisky means it goes beyond the bounds of your average food and drink product; the spirit is international in its outlook and is viewed as one of Scotland’s most valuable economic and cultural assets.

“The Scotch whisky industry is terribly important to the Scottish economy,” says Karen Betts, who took up the role of chief executive of the SWA in May.

“It employs 10,500 people in Scotland and around 7,000 of those jobs are in rural areas. We support in total 40,200 jobs across the UK.”

The work created by the industry holds additional importance because of the high proportion of distilleries based at the heart of rural – and in some cases, isolated – communities.

“One of the great things about Scotch is that it is not just restricted to the Central Belt,” explains Betts.

“It covers the whole of Scotland. There are areas that have more distilleries than others, but with the revival of some out-of-the-way distilleries, it feels to me like you don’t have to go that far in Scotland these days to find a working distillery.”

The relationship between the distilleries and the communities that surround them is beneficial in many ways.

The distilleries act as major employers in their area, for example the Isle of Arran Distillery in Lochranza which employs local people as stillmen, tour guides and provides work in its popular visitor centre.

Betts says: “The distilleries are providing jobs in rural communities that in some cases wouldn’t otherwise exist and that is really important.

They contribute to the local economy and they bring in an element of a successful industry.”

Fresh from a meeting at the Isle of Arran Distillery’s mainland base near Stirling, Betts can say with confidence that growth is on the cards for the company, which has exciting plans to build a second distillery on the island.

Looking beyond exports and employment, Scotch whisky distilleries operate as busy tourist attractions, with Arran welcoming 100,000 visitors in 2016.

“Whisky has become a really important part of the tourism industry,” says Betts.

“I was in Speyside recently where there is a Malt Whisky Trail which you can follow, and many of the distilleries up there are reporting an increase in visitors, around a doubling in the last three to five years.”

Then there’s giving back which takes various forms, from sponsoring a new kit for the local football team to supporting the pipe band to get to the European Pipe Band Championships.

“One of the really important contributions, I think is the support the distilleries provide to the local community,” says Betts.

“The distilleries give back to the communities they are based in and equally without the communities they wouldn’t have the workforces that they do.

“I think there is a real consciousness of the importance of that link.”

It’s not just Arran that is eyeing up expansion. The industry has seen an unprecedented level of investment by both existing players and new entrants in the last four or five years.

Since 2013, the Scotch whisky industry has seen record expansion with 15 distilleries starting production and a further seven set to open later this year.

“With the success of Scotch, people want to be part of an industry that has a proven track record and is a global exporter,” says Betts.

It may also have something to do with the global growth of single malt, which has seen an increase of 12 per cent in the last year.

“Their relative position in the Scotch whisky category is growing,” adds Betts.

The result is an increase in interest from people looking for innovative opportunities to enter the market and it ties in with the trend for consumers wanting to know exactly where the food and drink they buy comes from.

“The great thing about single malt is it is absolutely of a place. It will be made with the water of that place and most of the distilleries source their cereals in Scotland and source their yeast in the UK.

“They are very much products of a particular place and synonymous with Scotland.”

By all accounts those healthy export figures and the trend for distilling is set to continue, but no industry can ignore the uncertainty presented by the vote to leave the European Union and the SWA has a clear vision for what it wants to see come out of Brexit as an industry trade body.

“Brexit, for us, is about being able to continue to be a successful exporting industry,” says Betts.

“About 35 per cent of our exports go to the EU at the moment and the trade agreements between the UK and the EU post Brexit are of great interest to us. We would like to see a free trade agreement there.

“In an industry where we are exporting 39 bottles of whisky per second, we will want to see customs processes and procedures in place that minimise costs and complexity.

“We want to be able to get our goods into the EU easily and quickly enough and we want to be able to get them through the EU if they are going to countries beyond.”

A key concern for the Scotch whisky industry will, of course, be the future of its supply chain. While the primary ingredients – water, cereal and yeast – tend to be sourced on home soil, many distilleries look further afield for innovative branding and packaging ideas.

“You have got the bottles, the caps for the bottles, the packaging,” explains Betts.

“Some companies are getting that from France or Poland because if you want something different, sometimes you have to go to very specialist manufacturers outside the UK. How will Brexit impact that?”

Further along the supply chain, there’s the haulage industry to think about, but as we wait to see how the UK’s departure plays out, all the SWA can do is set out its priorities and hope.

“Business needs stability, certainty and consistency. As businesses, we will play the cards we are dealt, but the further in advance we know about things, the better we can operate.

“Knowing with enough time what the landscape is going to look like is really important to us.”

– In 2016, exports were up 4 per cent in customs value on 2015 to £4,008,927,149 – worth £127 per second.

– Volume was up almost 5 per cent to more than 1.2 billion bottles, with almost 39 bottles exported every second.

– Single malt Scotch exports were worth more than £1bn for the first time, up almost 12 per cent to £1.02bn and equivalent to 113 million bottles shipped overseas.

– Last year, Scotch was directly exported to 182 countries, up from 174 in 2015.

Economic impact

– £4 billion generated in exports by Scotch whisky.

– Scotch makes up 73 per cent of Scottish food and drink exports.

– The industry adds £4.9bn to the UK economy.

– 40,200 jobs supported by the industry across the UK, including more than 10,500 people directly employed in Scotland. Rural jobs account for 7,000 of those jobs.

– £1.3bn paid in salaries in Scotland in 2016.

– 15 new distilleries opened in Scotland since 2013, and seven more set to open in 2017.