Sun, Aug 31, 2014 - Page 14 News List

Whisky’s worries mirror economic fears in Scotland

By Martin Benedyk and Danica Kirka  /  AP, ISLAY, Scotland

Britain’s Prince William, left, and Catherine, Duchess of Cambridge, try some whisky during a tour of The Famous Grouse Distillery in Crieff, 20km west of Perth, Scotland, on May 29.
WARNING: EXCESSIVE CONSUMPTION OF ALCOHOL CAN DAMAGE YOUR HEALTH

Photo: AFP

Carl Reavey plunged his nose into the glass, inhaled the amber liquid’s scent, then sipped. Slowly.

It is said that Scotch tastes of the place where it is made, so Reavey’s Bruichladdich Black Art single malt would offer a touch of barley, a splash of the sea and a whiff of salt from the island of Islay, 225km west of Glasgow.

That taste takes time — a long time — to produce, with top-rated Scotch aged for decades. And it means distilleries need to have long-term plans for investments and financing — all of which could be thrown into turmoil in a single day — Sept. 18 — when Scotland votes on whether to leave Britain.

Whisky makers and many other businesses are worried about the risks involved in finding themselves overnight in a new country with, among other things, a different currency.

“The uncertainty associated with independence, rather than independence itself, really, I think is the concern,” Reavey said.

The most contentious issue so far has been what currency an independent Scotland would use. The central government has ruled out sharing the pound, saying British taxpayers should not be forced to underwrite economic and fiscal policies over which they have no control. Pro-independence leader Alex Salmond has refused to offer a plan B, arguing that the stance of the unity advocates is merely a scare tactic.

For many companies, that is not a bluff worth calling.

If Scotland were to take a new currency, businesses would suddenly find themselves in the position of having to pay back loans they took in pounds with new money of uncertain value. The risk is a new currency would be weaker than the pound because it would be based on an economy, Scotland’s, which is smaller than the rest of Britain, which includes England, Wales and Northern Ireland.

The currency debate is especially important to Scotland’s financial services industry, which accounts for 25 percent of the region’s economy, excluding oil and gas. Scotland-based groups such as the Royal Bank of Scotland and Standard Life, which rely on the stability provided by the pound, have warned about the potential risks of independence.

Part of that would come from the fact that an independent Scotland may be forced to drop out of the EU and have to reapply for membership. The union of 28 countries guarantees free movement of money and people — a precious asset for companies, particularly multinational corporations, as well as exporters.

Nine out of 10 bottles of Scotch are sold overseas for a value of £4.3 billion (US$7.1 billion) a year. Being outside the EU would raise the prospect of new export duties to the EU, the world’s largest trading bloc with more than 500 million people. Many distilleries import grain from EU countries to make whisky, something that could become more expensive. Scotland would also have to take on the job of shielding the drink from unfair trading practices, protect its trademarks and safeguard an estimated 35,000 jobs

The broad-ranging uncertainty is the primary weapon of anti-independence campaigners. The key question for voters, not just business owners, is whether Scots would be economically better off if they severed ties with Britain.

Salmond says Scotland will grow rich from its North Sea oil reserves once it is free of meddling politicians in London who have wasted the country’s energy wealth. Salmond wants to funnel a portion of that revenue into a special fund like the one in Norway, which has set aside the equivalent of US$883 billion for future generations.

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