Scotch H1 exports reflect ‘uncertainty of future trading conditions’

Scotch whisky exports grew 10.8% to £2.19 billion (US$2.66bn) during the first half of 2019, however a trade body warns that the growth reflects “uncertainty in future trading conditions”.

According to HMRC figures released by the Scotch Whisky Association (SWA), the volume of Scotch exports increased by 7.1% to 598 million 700ml bottles.

Single malts “continue to grow in popularity”, up 18.8% to £652m (US$794m) during the period. The sub-category makes up 30% of the value of all Scotch shipped overseas.

Blended Scotch whisky grew exports by 7.5% to £1.35bn (US$1.64bn).

The SWA said that the export growth demonstrates the “enduring popularity” of Scotch around the world.

However, the trade body believes that it also suggests that a number of distillers have exported some stocks early ahead of a no-deal Brexit in March/April 2019, which is backed up by a “spike” in EU exports in the first quarter.

The SWA said that the recent figures “do not necessarily, therefore, reflect steady state trade for the Scotch whisky sector, and do reflect the uncertainty in future trading conditions that the industry is currently having to deal with”.

The trade body also warned that the sector faces tariffs on exports to some key global markets after Brexit, as well as an excise tax rise from the HM Treasury’s budget plans, which “affects Scotch whisky sales in the UK and the industry’s tax treatment in export markets”.

“Demand for Scotch whisky is growing both in developing markets, like India, and in established ones like the US, Japan and Germany,” said SWA chief executive Karen Betts

“This reflects the enduring popularity of Scotch whisky in so many cultures around the world.

“It also reflects our industry’s continued focus on improving trading conditions – for example, removing tariffs and discriminatory taxes – across our global markets.

The figures, however, highlight “the uncertainties in today’s challenging trade environment”, Betts warned.

“The value of exports grew more than anticipated in the first six months of 2019. We believe this was driven by action taken by producers to mitigate the risks of a no-deal Brexit and the threat of tariffs in key global markets.

“For example, there was significant growth in exports to South Korea and Morocco, both markets where tariffs could have been re-imposed if the UK had exited the EU without a deal on 29 March. While some progress has been made on continuity agreements, there is more work to be done.”

‘Prolonged uncertainty’

The SWA is calling on the UK government to “ensure certainty in future trading conditions as parliament returns from summer recess”.

“We are urging the government and MPs to work constructively together to enable the UK and the EU to agree on the terms of the UK’s departure,” said Betts.

“This will give us clarity in the UK’s future trade relationships with the EU and other global markets.

“Prolonged uncertainty is costing the industry money in no-deal planning and in exporting as companies have, where they can, brought exports forward, incurring additional capital on additional warehouses and other associated costs.

“The UK government must take these pressures into account when deciding on duty rates in the autumn Budget.

“Cuts and freezes to spirits duty over the last five years have increased the revenue available to government to spend on public services, while at the same time giving our industry the confidence to invest in production and tourism, benefitting communities across Scotland and our UK supply chain.

“Uncertainty in our trading environment means, now more than ever, that the Scotch whisky industry needs continued tax stability here at home.”

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