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As Scotland’s Vote On Independence Nears, Scotch Whisky Industry Faces Uncertainty

September 17, 2014

With Scotland voters set to go to the polls tomorrow, Scotch whisky’s biggest players have mostly refrained from taking an official position on the country’s independence referendum. However, in a tradition-rich industry where even the newest products must be aged several years before being bottled, the leading companies are clearly wary of the uncertainty that would come on the heels of a “Yes” vote for independence.

When contacted by SND, most of Scotch’s top companies declined to comment on the referendum and its potential impact on the industry, instead referring requests to the Scotch Whisky Association (SWA) trade group. While the SWA has also elected not to take a “Yes” or “No” stance on independence, the arguments made by chief executive David Frost in recent days unequivocally favor the status quo.

“This industry is in a special position in this debate. We can make Scotch whisky only in Scotland and our brands are indissolubly linked with it. 35,000 jobs depend on the industry,” said Frost in an open letter. “Our success is not the result of chance. It has come about because of a wide range of factors which have been well provided for us within the U.K. and would need to be similarly provided in the future if it were to be within an independent Scotland.”

Frost goes on to contrast what he calls the “certainty” of the current industry environment—with regard to currency, E.U. membership and taxation, with his contention that, “the nature of an independent Scotland’s currency remains unclear, and self-evidently this could affect our exports, management of supply chains, pricing, and competitiveness. The taxation regime also remains to be developed, and any regulatory divergence between Scotland and the rest of the U.K. may increase costs to business.”

The CEOs of the two biggest Scotch players—Ivan Menezes of Diageo and Pierre Pringuet of Pernod Ricard—have both said publicly that the decision on independence was best left to the Scottish voters. However, in an interview with the Wall Street Journal earlier this year, Menezes said it was “extremely important” for Diageo and the Scotch whisky industry to remain part of the E.U. in order to continue benefiting from “free-trade agreements around the world.”

While the leaders of Scotland’s pro-independence movement have said they want to remain in the E.U., doing so would likely require the unanimous backing of the 28 member states. Achieving this would be no easy feat, as countries like Spain and Bulgaria are currently struggling with their own independence movements.

Amid all the uncertainty surrounding tomorrow’s vote, some Scotch industry leaders haven’t been as circumspect as Menezes and Pringuet. In an open letter published in the Scotsman newspaper in late August, more than 120 Scottish business leaders urged a “No” vote, saying “the business case for independence has not been made.” Among the signatories were Peter Gordon, chairman of William Grant & Sons; Ian Curle, CEO of The Edrington Group, and a host of other Scotch whisky executives.

The letter said what most in the Scotch whisky industry are apparently thinking: “uncertainty is bad for business.”

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