What if Scotland left Team UK … and what will the whisky industry do?
With the Scottish referendum on secession from the UK scheduled for 18 September 2014, many commentators wonder how the 4 million Scottish voters will decide, considering that for months the campaign to keep Scotland British has been able to offer little more than dire warnings should those north of the border say yes to the Sexit (short for Scottish secession).
Although English media have painted bleak pictures of an independent Scotland, thus barely concealing an undercurrent of threat to the Bravehearts (“Scotland the naïve needs to get real”, The Sunday Times newspaper ran a comment on 9 February 2014), the English public has displayed remarkably little interest in the whole affair.
A reason may be that the prospect of Scotland breaking away is not taken seriously. Polls show the no side (to secession) comfortably ahead. On 10 February 2014 only 43 percent of the Scottish voters were in favour of secession. But, as the Scottish First Minister, and proponent of independence, Alex Salmond likes to point out, the last seven polls have tightened – in favour of yes.
It’s still early days to predict which way the Scots will vote. Were the referendum a regular election, pollsters would only take polls seriously which are conducted a few days before the casting of votes. As much as a third of the total electorate only make up their minds on the way to the polling station.
The reasons why Scotland would like to cut the ties with England have little to do with keeping the proceeds from their North Sea oil – which they would like not to have to share with England as they do now. What’s driving so many Scots to consider saying yes, a Guardian commentator wrote recently, “has less to do with their view of Scotland than what they believe has happened to Britain. […] Since 1979 Britain has been breaking away from what used to be called the post-war settlement. Led by an over-dominant London and south-east, British politics has been tugged rightward. The prevailing ethos of the past 35 years has been one of turbo-capitalism, privatisation and a shrinking welfare state. Yes, the process was begun by Margaret Thatcher, but Tony Blair and Gordon Brown did little to stop it, and in some cases accelerated it. And Scotland wants no part of it.”
To date, the UK government has given the Scots few reasons why they should stay in the union. What they have been told (by London) is that if they wanted to claim all of the oil money themselves, they also had to take on some of the UK’s debt. Moreover, they would not be able to keep the pound sterling as their currency and would have to re-apply for EU membership which might take ages.
Actually, in the worst case scenario, a break-away Scotland will not have a currency, or an army, or a navy, or a central bank, and it won’t have access to the English oil and gas under England’s territorial waters.
Commentators may have a point that an independent Scotland would be worse off than in union with England, given their ageing population and higher social spend, which would require a rise in taxes (which no one wants) to keep it at present levels.
But economic reasoning is bound to fall on deaf ears if the real motivation for secession is “a despairing fear that, given the way a few marginal seats in middle England can decide UK elections, Britain will never again return to the kind of social democratic values that still find a ready consensus in Scotland. It’s not that the Scots are leaving Britain – it’s that Britain has left them.” (The Guardian)
All of this political grand-standing by Scottish and UK politicians leaves the Scottish drinks industry in a quandary. Whisky is, next to oil, one of Scotland’s biggest industries. The EU alone accounts for about 40 percent of total Scotch sales, making it the whisky industry’s single largest market. What happens to the whisky industry should Scotland secede from the UK? That scenario may be averted, but what happens if David Cameron honours his pledge to hold a vote on EU membership in 2017 and the UK leaves the EU altogether? At stake could be billions of litres of whisky, worth tens or even hundreds of billions of pounds, which would become a lot more expensive if import taxes (into the EU) are added to them.
In view of the vitriolic EU bashing by Westminster in recent years, analysts and investors have long been wondering what the drinks industry’s stance is in all this. Today they are none the wiser. Like his predecessor Paul Walsh, the current CEO of Diageo, Ivan Menezes, told media on 30 January 2014: “We’re clearly assessing all the possible scenarios and await more clarity”.
He added: “We’re not engaging in the independence debate but we are very active. We have this fantastic business in Scotch whisky and we want to ensure we protect this business regardless of the outcome (of the referendum).”
In 2012, Diageo, the maker of Johnnie Walker and assorted whiskies, said it plans to invest more than GBP 1 billion (USD 1.54 billion) in Scotch whisky production over the next five years.
Without being too overt about it, Scotch whisky makers’ strong preference is to keep the double union: Scotland within the UK and Britain within the EU. But their absolute priority would be to remain within the EU’s single market.
Hopefully, they don’t back the wrong horse.
