SWA gives Brexit outlook

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samcoyne
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SWA gives Brexit outlook

Postby samcoyne » Fri Apr 28, 2017 4:56 pm

Scotch Whisky exports increased last year by 4% to more than £4 billion, with the value of Single Malts exceeding £1bn for the first time. This success marks a return to growth for Scotch exports, following a few years of levelling off and small declines as a result of economic headwinds and political uncertainty in some markets.

Last year, Scotch remained the biggest net contributor to the UK’s balance of trade in goods. In 2016, without the impact of Scotch Whisky, the UK trade in goods deficit would have been 2.8% larger at almost £139bn. Scotch Whisky accounts for over a fifth of the UK’s total food and drink exports.

Scotch also continues to lead the way for the rest of Scotland’s food and drink sector. The ‘national drink’ makes up 73% of total Scottish food and drink exports.

The Scotch Whisky Association (SWA) has analysed the reasons for the resurgence of exports and the outlook for the future.
While the industry is optimistic about renewed demand for Scotch, there are challenges as well as opportunities on the horizon, including the seismic changes that Brexit brings to an increasingly competitive global marketplace. The weakness of sterling, for example, had a significant impact on exports in the second half of last year. This short-term positive currency impact should be seen in the context of continuing uncertainties around Brexit in the longer term.

Scotch Whisky exports - key facts
Up 4% in customs value on 2015 to £4,008,927,149 – worth £127 per second
Volume up almost 5% to more than 1.2 billion bottles – almost 39 bottles exported every second
Single Malt Scotch exports worth more than £1bn for the first time - up almost 12% to £1.02bn. This is the equivalent of 113m bottles shipped overseas
Scotch was directly exported to 182 countries, up from 174 – showing its truly global nature
What categories of Scotch Whisky are growing?
All categories of Scotch Whisky grew last year, but Bottled Blended Scotch Whisky is still by far the biggest. It accounted for 69% of all Scotch volumes and values exported in 2016. Bottled Blended Scotch has traditionally been the largest category of Scotch and last year value increased for the first time since 2012 by 1.4% to £2.75bn.

Single Malt was a stand-out performer last year. With Single Malt exports growing at a faster rate than that of Scotch overall, market share is increasing. It now makes up just over a quarter of the total value of Scotch exports.

Markets
Scotch Whisky is popular across the globe and demand is from a diverse range of markets. In terms of regions, the European Union remains the top destination for exports, worth around £1.2bn of the total. North America is the second largest, taking exports worth more than £1bn, followed by Asia with shipments of £768m.

The USA remains the number one market by value, growing 14% to reach £865m. Consumers are seeking out premium products and Single Malts benefited from such trends – value was up 22% to £267m.

There was increased demand from a number of larger European markets, including Spain, the fourth biggest market, up almost 10% to £167m; Germany, the number five market, up 13% to £164m and Poland, up 19% to £63m. This reflects some improved economic performance and continued growing popularity of Scotch across parts of Europe.

India is becoming increasingly significant with value of exports up almost 14% to £97m to make it the ninth biggest market for Scotch. But its full potential will not be realised until its 150% import tariff is reduced. The SWA is encouraging the UK Government to pursue a Free Trade Agreement (FTA), including measures to cut the tariff, with India as priority after Brexit. Exports to China increased 0.5% to £41m with the market continuing on an upward trend following some decline due to austerity and political decisions.

We are also calling on the Government to secure existing EU trade deal benefits, such as the South Korea FTA and the Colombia/Peru agreement that have created a more level playing field for Scotch in those markets. Some £87m of Scotch was exported to Korea last year and Colombia grew 14% to £27m

Outlook
This is an uncertain time for all business with a UK General Election on 8 June and Brexit negotiations getting underway. While we expect demand for Scotch Whisky to grow in markets around the globe, we need support from governments at home and abroad. The industry’s continued success cannot be taken for granted by government and policy makers.

The Scotch Whisky industry was, for example, disappointed by the near 4% increase on spirits duty excise announced in the spring UK Budget and is calling for fairer treatment in future fiscal statements. The SWA would like to see an overhaul of the domestic excise system when the UK leaves the EU.

The industry has set out five key objectives for Brexit:
As open a trade policy as possible, securing existing EU trade deal benefits and developing an ambitious agenda of new and refreshed FTAs.
Robust legal protection of Scotch Whisky in the UK, EU and global markets.
Business certainty and consistency by transposing EU single market legislation of relevance to Scotch Whisky into UK law.
Scoping out opportunities where a distinct UK approach could benefit domestic industry
A domestic tax and regulatory agenda that delivers a platform for international growth.
Julie Hesketh-Laird, Scotch Whisky Association acting chief executive, says, “With Scotch Whisky exports returning to growth and rising to more than £4 billion, and Single Malts exceeding £1bn for the first time, we’re feeling optimistic about the future. Demand is rising in mature markets, such as the USA, and newer markets, including China. This confidence is reflected in the number of new distilleries – 14 have been opened in the last few years and we know of about another 40 in at various stages of planning.

“However, we have to be alert to the challenges, as well as the opportunities, of Brexit and political changes in the UK and across the globe. Industry success can’t be taken for granted and we need both the UK and Scottish Governments to work in partnership with us to deliver a business environment – at home and overseas - that supports sustainable growth. At home, for example, we are calling for a ‘sector deal’ for Scotch as the new UK industrial strategy develops, recognising our economic significance to communities across the country. And we have clearly set out our objectives for Brexit to support jobs and growth in the industry in an increasingly competitive global market.”

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