There is a bright spot in the Scottish economy and it’s threatened by Brexit.
The Scotch Whisky Association (SWA) revealed that whisky exports rose by 3.1% in the first six months of the year — the first increase since 2013.
Whisky is the second largest export for Scotland after oil and gas and the industry uses the UK Trade and Investment (UKTI) to promote the spirit from 270 diplomatic posts across the globe.
The increase in exports will be seen as a boon for the country as the economy is suffering due to low oil prices.
Oil accounts for two-thirds of the country’s profits and a large slice of employment in Scotland. If the price falls, so does revenue and the health of the country’s balance sheet.
Oil prices fell to low double digits from over $100 per barrel in June 2014. Oil prices are still struggling to stay above $50 per barrel. Meanwhile, North Sea oil reserves are drying up.
While being an EU member is massively important to Scotland
But while whisky seems to be a saving grace for Scotland’s economy at the moment, it looks like Brexit will soon hurt this sector significantly.
Already, according to SWA data, while the volume of whisky exports increased, the value fell to £1.7 billion, from £1.71 billion from the same period the previous year. In other words, more is being shipped but at a cheaper price.
On top of that, the figures cover only one week of the period after the European Union referendum vote on June 23.
While it is unknown what Britain’s exit from the EU will look like — in terms of taxation, trading conditions, and other issues — the SWA says it could pose a massive problem for trading in the future. Even though it will benefit from a short-term boost from a weak sterling.
“It is clear, however, that the uncertainties of the Brexit vote will create challenges for exporters and we continue to encourage early clarity on the likely shape of the UK’s future trading relationship with the EU and other countries. We are working closely with our members and government to ensure the industry’s trade priorities are well understood, to promote open markets, and to identify opportunities to grow our exports in the future,” said David Frost, Scotch Whisky Association chief executive.
Back in 2014, the SWA warned that leaving the European Union could pose a huge threat to Scotland’s whisky industry. This was because there was no clarity over whether Scotland would retain its membership in the EU if it decided to become independent from the UK.
39% of Scotch whisky exports by volume goes to the EU, so Brexit could significantly hurt the industry.
Already, Scotland is in a fix — it is on the brink of self-inflicting £1.6 billion in budget cuts over the next five years, according to new data from the research unit F
raser of Allander Institute (FAI).
Scotland’s newly devolved tax powers mean it is increasingly reliant on its own economy, rather than handouts from Westminster. But the Scottish economy is projected to perform so badly that the government may need to cut 17% from some government budgets to balance its books.
With Brexit now potentially hurting its second largest export sector — things are not looking great for Scotland’s economy.
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