Brexit Is Costing The Scotch Whisky Industry 5 Million A Week – Forbes

Scotlands ruling party, the Scottish National Party (SNP), have recently claimed that trade complications created by Brexit are costing the Scotch whisky industry 5 million ($6.9 million) a week.

The SNP used sales figures comparing sales from January-May 2021 to the same period in 2019, revealing that export levels were lower by 105.7 million ($146.5 million). Lending strength to the argument is that EU sales figures following the end of the Brexit transition period, from January to March 2021, dropped 135.9 million ($188.5 million) compared to the same period in 2019.

UK Prime Minister Boris Johnson with whisky in 2019. His government has a mixed record when it comes ... [+] to defending the whisky industry's interests.

The UK government, led by the pro-Brexit Conservative party, have called the claims misleading, saying that it is hard to draw conclusions in the wake of the effects of the Covid pandemic and rising export levels compared to 2020.

Walking the tightrope between these two views is the Scotch Whisky Association (SWA), which represents the interests of the industry across trade and policy. In an official statement, it pointed out the rising levels of exports since a 2020 nadir, while also making clear that doing business in the EU has become more complicated thanks to the changes in trade that Brexit has created:

The way Scotch Whisky is exported to the European Union has changed since Brexit, and producers have had to adapt to changes to customs systems, labelling and paperwork, as well as the withdrawal of some transport services.

"The level of exports fluctuates month by month, and this has been impacted over the past eighteen months by both the Covid-19 pandemic as well as by the UKs departure from the EU.

While it was undoubtedly a tough start to the year for companies, the drop in exports in the first quarter is partly explained by increased exports in December 2020.

"Now that infection-control measures in many of our global markets are easing, the pace of the industrys export recovery is encouraging.

The cost of doing business is certainly higher for Scotch whisky companies because of Brexit, and to some extent favor larger companies that can absorb the costs while smaller producers might lose out. For example, the price of materials that come from the EU used in Scotch whisky has risen. The SNP Shadow Secretary of State for International Trade Drew Hendry claimed in June that the price of cardboard and glass used by the industry is up 12% and 7% respectively.

Many UK retailers were also not shipping to the EU following the end of the transition period. The worlds largest online whisky retailer, The Whisky Exchange, has recently started shipping to the EU again after many months of not being able to do so, while another large online vendor, Master of Malt, is still not delivering to the EU.

Despite Downing Streets protests, Brexit has also complicated the process of exporting despite the free trade agreement signed between the EU and UK. On its website covering Brexit, the SWA makes clear that there have been delays and disruptions to shipments, that exporting to the EU is now more expensive and complicated, and shipping to Northern Ireland is still problematic.

Though Brexit has clearly not helped the Scotch whisky industry thus far, the picture is still rosier than 2020, when US tariffs and economic uncertainties from the Covid pandemic were also hitting overall sales hard. However, as the EU is one of the Scotch whisky industrys key markets, Brexit uncertainties are unlikely to go away any time soon.

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Brexit Is Costing The Scotch Whisky Industry 5 Million A Week - Forbes