Distillers warn challenges still loom for Scotch whisky industry

THE Scotch whisky industry has given a qualified welcome to new figures that point to a recovery in exports from the sharp downturn sparked by the pandemic and damaging import tariffs in its biggest market, warning that challenges still lie ahead.

New figures show Scotch exports were 31 per cent higher for the first half of the year, at £2.2 billion, compared with the opening six months of 2020 – a period that saw the industry rocked by lockdown restrictions in key markets and the ongoing effects of a 25 per cent import tariff on single malt in the US. Volumes increased by 42 per cent to 597.8m bottles in the first half, figures the Scotch Whisky Association show.

Despite hailing the recovery as “very promising”, the SWA highlighted that exports in the first half were still 10% lower than the corresponding period in 2019, before the pandemic struck.

The organisation also emphasised that it would take time for distillers to bounce back from the effects of the US tariffs, which were blamed for exports to North America falling by one-third to £729m in 2020.

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The tariff was imposed by the Trump administration in October 2019 as part of a tit-for-tat trade dispute between the US and the European Union, which has its roots in aircraft subsidies.

A five-year suspension of the tariff was agreed between the UK and US in March in light of the change of administration in Washington, but the SWA warned yesterday that it will “take time, investment and support for exports to the US to regain their strength following a devastating 16 months.”

Exports to North America in the first half of this year were, at £487.4m, 34% lower than for the first six months of 2019.

The twin effects of the US tariff and the pandemic, which has hammered whisky sales in the hospitality and travel retail sectors around the world, were underlined by an £1.1bn fall in overall exports to £3.8bn in 2020, a drop of 23% on the year before.

SWA chief executive Karen Betts said: “The pace of recovery of Scotch whisky exports is very promising. Last year, the combination of US tariffs and Covid-19 brought Scotch whisky exports to their lowest level in a decade, so it’s encouraging to see them start to regain strength.

“But like many other sectors, Scotch whisky companies are feeling the ongoing impacts of trade disruption on our supply chain and global distribution, and the cost of goods and services has risen significantly. In addition, international tourism is yet to recover and global hospitality is some way from emerging from the impact of the pandemic.”

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The SWA flagged the impact of Brexit in the figures for the first half of year. It cited the introduction of new trading arrangements, alongside the effects of lockdown restrictions, as exports to the EU fell in the first three months of 2021, compared with 2019. But it reported that exports to the bloc grew at a faster rate between April and June than in the same period of two years ago.

Exports to France, the second most valuable market for Scotch whisky, climbed to £195m in the first half, up by 16.55% on the opening six months of 2020, but down 10.3% against the first half of 2019.

The association added that exports to Asia recovered quickly in the second half of 2020, and continued to grow in the first half of the year.

The value of exports to China surpassed the £89m recorded for the whole of 2019 during the first half of 2021, growing by 126% to £91m.

Exports to Singapore, the third most valuable market for Scotch from where exports are often made in turn to China, were up 10.47% compared with the first half of 2020 at £138.2m.

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However, exports to Singapore remained nearly 20% lower than in the opening six months of 2019.

Ms Betts added: “Our industry will need support to recover fully from the turbulence and lost exports of the last couple of years. As part of this, the UK government must commit to completing the long-awaited review of alcohol duty, and to living up to its manifesto commitment to ensure that Scotch whisky is treated fairly against other categories of alcohol.

“As we continue to wait for this promise to be delivered, there are other opportunities the government can pursue to boost the industry’s recovery in global markets. Reducing the 150% tariff on Scotch whisky in India must be the

UK government’s top priority when trade negotiations begin later this year.”

The SWA announced last month that Ms Betts would be leaving the organisation to become chief executive of the Food & Drink Federation.

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992