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Scotch on the rocks: our distilleries need government support to mitigate the damage caused by tariffs and Covid

Scotch on the rocks: our distilleries need government support to mitigate the damage caused by tariffs and Covid
3 min read

Who hasn’t been seduced by the romance of Scotch whisky, the industry which captures the essence of Scotland in a bottle? The ingredients are simple: barley, water and yeast.

Ninety per cent of malting barley comes from Scottish farms which compete to secure the premium it commands.

The water sourced from hill and mountain springs is crucial for Scotch’s clarity and purity, which is why most single malt distilleries are located in relatively remote rural locations.

Unlike gin, Scotch whisky requires by law a minimum of three years’ maturation, and most single malts are not bottled for market before they are at least 10-years-old. There are serious costs tied up in whisky stored in warehouses while the alchemy of its maturation in sherry or American oak casks in the moist environment of rural Scotland works its magic.

So although gin is a competitor to Scotch, most distillers can produce both, with gin generating cash flow while the whisky matures.

Rishi Sunak’s alcohol tax review has not been welcomed by the industry

For as long as I can remember, Scotch whisky has been close to the top of the UK’s export list. In the 1970s, working in economic development, I engaged with the industry across Speyside. As an MP in north-east Scotland, I had as many as 12 distilleries in my constituency. Over the decades, I have seen the industry face ups and downs, with distilleries closed or mothballed. I have seen the emergence of single malts as a significant market, and the opening of new distilleries to meet the demand.

What is clear to me is that Scotch would not have retained its position without consistent innovation, marketing and positive response to challenges – and the last few years have brought a few.

The European Union accounts for a third of our whisky exports. J&B and Coke is the staple drink in almost any Spanish bar. The Italians anoint their ice-cream with single malt. The French too, notwithstanding their domestic wine and brandy, appreciate a good Scotch. So Brexit has presented challenges, creating more bureaucracy and friction in sourcing supplies of, for example, glass and packaging materials. The post-pandemic supply chain constraints and global inflation have presented other cost challenges in a competitive market.

Over time, it may be that new trade agreements will open up new markets. The five-year suspension of extra tariffs by the United States has helped, as well as the ending of the five per cent tariff for Australia. The real prize will be a reduction or elimination of tariffs for the potentially huge Indian market.

A few years ago, I had the honour to be sworn in as a Keeper of the Quaich at an almost Freemason-like event at the industry’s biannual banquet at Blair Castle in Perthshire. The accolade is given to friends of the industry who have contributed to its reputation and success, and features keepers from all over the world. Apart from the reverent event, the banquet is an indulgence of all things Scottish – tartan, kilts, bagpipes, music and singing – all in celebration of the elixir that is Scotch.

The industry has demonstrated resilience in the face of manifold challenges. Nothing can be taken for granted. That is why we need good relations with the EU, new beneficial trade agreements, and action to keep costs down.

Rishi Sunak’s alcohol tax review has not been welcomed by the industry. I do not understand why we tax our world-class spirits industry more than the mostly imported wine sector. Past experience shows that hiking excise duties on whisky reduces revenues by depressing demand, and it undermines trade negotiations. The industry through its own flair will thrive. Government should help by not adding obstacles, but striving to remove them.

 

Lord Bruce is a Liberal Democrat peer. 

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