The food and drink industry in Scotland has long been recognised as one of the country’s most precious jewels, and despite severe disruptions such as the financial crisis, and the current economic and political uncertainty, it continues to go from strength to strength.
The growth of the sector has been astonishing, with a turnover of £13.9bn in 2016, and exports worth around £6 billion in 2017.
It is estimated that by 2030, total turnover will hit some £30bn, making it Scotland’s most valuable industry.
The success of food and drink in Scotland has been a standout example of collaboration between the industry and government, with the result being the creation of jobs and a global reputation.
The examples of growing, successful businesses are many, with both new and more established sub-sectors reaching ever greater heights.
Whilst the Scottish salmon industry continues to wow discerning palates from France to the US, and Single Malt remains the libation of choice for much of the world, other segments have also been prospering.
Recently we saw the MBO of R&W Scott, a key supplier of added ingredients to the bakery, confectionery and retail sectors in the UK. The MBO was led by the firm’s MD John Easton along with fellow directors Stephen Currie and Michael Hewitt and is a great example of the activity going on behind the scenes, highlighting the ambition and entrepreneurial spirit which is deeply embedded in the sector.
Having acted for the MBO team and bidco in this deal, this gave us an incredible insight into the sector. It may not be the most familiar of names, but it’s an £11 million turnover business, and yet another company that has helped form the foundations of the industry, having started in the 1870s, and is continuing to enhance it further.
Another business we’ve been working closely with, which again is perhaps less well known to many people, is the growing food & drink specialist wholesaler, the Food & Drink Hub, based in Cumbernauld. It provides routes to market for suppliers to McColls, Nisa, Morrisons supermarkets, other retailers, and ScotRail. Managing Director James Laws and the rest of his team have ambitious growth plans.
More familiar is Brewdog, which has established itself on the world stage. In 2018 we also saw the first whisky distillery in the Borders in more than 180 years following a £10m investment by owner The Three Stills Company, and the growth of the Scottish gin industry.
Another newish kid on the block is the Arbikie distillery, created by the three Stirling brothers four years ago, and based in Lunan Bay on land their family has farmed since the 1600s. One of the UK’s biggest potato growers, they started using the “ugly” tatties which the supermarkets wouldn’t take, to make vodka. They now also make gin and at the end of 2018 launched the first Scottish rye whisky for 100 years. All ingredients are grown on the farm.
What all of these businesses, and others, have in common, is their drive towards innovation and quality. But also, as importantly for many, it has been their resilience in tough economic times, which will become all the more crucial in the next few months and years.
We currently find ourselves less than three months from leaving the EU, the outcome of which is as uncertain as it’s ever been. We may even see the UK fall out of the EU with no deal, the potential consequences of which are being hotly debated.
Whilst the industry has demonstrated its ability to adapt, it will undoubtedly face some headwinds in the coming months. For example, there may be a move to diverge from EU food standards in order to help facilitate a Free Trade Agreement with the United States, which could have a damaging impact on food and drink in Scotland. With various factions in the UK government still at odds, it wouldn’t be surprising to see further policy ideas of this nature being floated.
Whatever the outcome of the Brexit negotiations, it is incumbent upon all of us in professional services to adapt in the same way, to provide the necessary expertise to protect and promote the growth ambitions of this critical sector.
Providing the support to navigate whatever comes in the next few months will be a major challenge, but it’s vital we play our part in helping to champion a true global success story.
Michael Currie is a corporate Partner at Aberdein Considine