AS I SEE IT: TERRY MURDEN
Scotland’s distillers are hoping the Chancellor managed to develop a taste for whisky during last year’s visits north of the border, or more to the point that he got the message about the harm being done by US tariffs on single malts.
The Scotch Whisky Association has made its annual Budget call for a cut in duty, this time against a whopping £1.1 billion fall in sales. In the US – its biggest market – the industry has lost £340 million since a hike in tariffs late in 2019 in a tit-for-tat dispute with the EU.
With no end in sight to the dispute Scottish distillers want Rishi Sunak to cut domestic duties to compensate for the lost sales, though that looks like an un-winnable argument. As a result of his Covid rescue measures Mr Sunak is facing a huge black hole in the Treasury’s bank balance and he is odds-on to opt for tax rises rather than tax cuts.
The industry says EU exports fell by 15% last year, enough to prompt Scottish government ministers to hurl more Brexit abuse at Westminster, but this downturn is largely a result of the closure of hospitality and travel restrictions forced by Covid which has impacted all industries and will no doubt right itself when those measures are lifted.
The battle over the US tariffs is more pressing and a solution could be found if the two sides show some determination to heal what are self-inflicted wounds. It pre-dates Covid and there had been expectations that it would be resolved before the end of last year. As it is, the dispute is proving costly for distillers on both sides of the Atlantic.
American whiskey and other US products were targeted by the EU in response to Donald Trump’s decision in 2018 to slap tariffs on European steel and aluminium. Joe Biden has indicated that resolving the dispute it is not among his top priorities.
‘Although Irish whiskies trailed overall Scotch whisky sales in the US by about $1.5 billion in 2019, the gap is narrowing’
Since the levy was imposed the value of American whiskey exports to the European Union has dropped by 38%. American whiskey exports to the UK, a key overseas market, have plunged by 53%. Sales of Scotch to the US fell by 32% last year.
The figures are leading to lost jobs and could see some small malt producers go bust if the matter is not brought to head, though a straight reversal of fortune cannot be guaranteed simply by removing the levies. The slump in Scotch sales last year has to be considered against other trends.
Although Irish whiskies trailed overall Scotch whisky sales in the US by about $1.5 billion in 2019, the gap is narrowing.
In 2010, sales of Scotch were running 470% ahead of Irish whiskey, whereas in 2019 the gap was down to 76%.
As such, there are predictions that sales of Irish whiskey in the US could overtake sales of Scotch over the next 10 years, the first time this has been the case since before prohibition in the 1920s.
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