With the polls neck and neck ahead of a vote on Scottish secession from the rest of the UK on September 18, the independence debate is the hottest news ticket in town, and the Scotch whisky industry (worth £4.3bn or $6.9bn in export sales to the UK economy annually) is uneasy in some quarters about the business implications.
No doubt prompted by calls for the SWA to take a clearer line on whether it opposes independence or not, Frost today revisited arguments from the trade body's May annual review, stressing that the implications were huge with 35,000 jobs in his industry dependent on the vote.
“Our operations are at the heart of many communities around Scotland and we sustain economic activity in rural and remote areas that might otherwise have difficulty in attracting it,” he said.
Benefits of being in the UK
Frost said the industry’s success was not a result of chance but had come about because the Scotch was well provided for in the UK, and “would need to be similarly provided in the future if it were to be within an independent Scotland”.
"At UK level, we are fortunate to have - on the whole - certainty in our domestic business environment. Monetary and fiscal policy is predictably managed. We benefit from the fact that our domestic market is the sixth biggest economy in the world, large enough to support broad and balanced growth and provide a pool of relevant skills," he said.
“In contrast, as of now, the nature of an independent Scotland's currency remains unclear, and self-evidently this could affect our exports, management of supply chains, pricing, and competitiveness,” SWA CEO David Frost said.
He warned that a separate taxation regime would need to be developed, while any regulatory divergence between Scotland and the rest of the UK may increase business costs.
“In all these areas, we need further information and reassurance before we can assess whether we can mitigate these potential risks,” Frost said.
The legal framework provided by EU membership was fundamental, he added, given the protection of Scotch Whisky as a Geographic Indication (GI), while the spirit can be exported tariff-free across the single market, and producers can use the bloc to gain market access and benefit from its clout in trade negotiations.
Even temporary EU hiatus would be 'damaging and difficult to manage'
“Even a temporary interruption of EU membership involving exclusion from the single market or the customs union, if this were a consequence of independence, would be damaging and difficult to manage,” Frost warned.
In terms of exports, Frost said both the UK and Scottish governments had been supportive – in terms of influencing EU negotiations or pressing governments for fairer market access.
But he warned of risks if this support ebbed away, noting that the Scottish Government White Paper envisages a network of 70 to 90 overseas missions, while Scotch is exported to around 200 markets.
“A diplomatic network with the necessary geographic footprint, expertise, and influence to provide commercial and political support globally will continue to be essential,” he said.
“In short, as we consider the potential impact of constitutional change, we look for reassurance on how an independent Scotland could deliver a business, regulatory, and export environment at least as supportive as that which the industry currently enjoys,” Frost said.
'Scotch whisky will prosper after independence' - Distillery boss supports 'Yes Scotland!'
The SWA stops short of endorsing either side, but the CEO of another single-malt distiller told us – on condition of anonymity – that he supported independence.
“We believe that it will be a positive. Why would a newly independent Scotland do anything to harm one if its largest income streams and possibly the jewel in the crown of all its resources in terms of its Brand Scotland profile across the globe?” he said.
“The whisky industry is globally strong and will continue to prosper no matter what the outcome on September 18. An independent Scotland will have a strong interest in maintaining as much of the revenue in all parts of the process from field to bottle in Scotland, ensuring jobs are protected and that the industry continues to grow and prosper,” he added.