Pure Gould: Scotch and the EU

As the Scottish referendum looms, Patience Gould ponders the possible fate of the scotch whisky industry if EU membership is lost

London’s first dedicated gin distillery visitor centre opened its doors in May. Christened Beefeater London: The Home of Gin, this is a classy act, but exactly what you would expect from a producer in the premium Pernod Ricard-owned Chivas Brothers stable. It seems all the experience the company has with its scotch whisky visitors centres has been put to good use, and I’ve no doubt this will become a key tourist attraction. 

To further the cause the producer has unveiled a limited edition of the London dry gin, Beefeater’s Spirit of London. This is already available in 26 markets, in its distinctive presentation which, with the Union Jack wrap-around, is a goodly mix of patriotism and homage to the brand’s award-winning global advertising campaign My London. This it is hoped will underline Beefeater not only as a modern brand icon but one that has real provenance in the UK’s capital city.

Indeed master distiller Desmond Payne has been extremely busy of late and has also produced Beefeater Garden Gin, which will only be available at the visitor centre shop. With a premium price tag £22.50, inspiration was taken from Chelsea’s Physic Gardens, which are just a stones throw from founder James Burrough’s original distillery in Chelsea. At 40% abv, it combines the flowering herb lemon verbena and aromatic thyme with the signature citrus notes of Beefeater.

I wonder if the likes of Diageo will come to rue the day all the doors on its gin distilleries in London – most notably Goswell Road where both Gordon’s and Tanqueray were produced – have been closed. Production of these two tinctures was first moved pre-Diageo to Basildon and is now in Fife – yes, Fife, which is somewhat north of Hadrian’s Wall. I mention this not just for reasons of sentimentality but because of the looming Scottish referendum.

Those who think this is merely a question of either a Yes or No vote on September 18 and that all will be well regardless of the outcome should think again. Feelings, I’m reliably informed, are running high betwixt those for and those against camps and whatever the outcome it will take years for the underlying animosity to die down. 

What I am slightly surprised at is the almost deafening silence from the drinks industry, particularly when it comes to scotch whisky. True, it must feel like being between a rock, the SNP and a hard place, but the issues facing scotch are really horrendous and, should independence succeed while Mr Salmond and his cronies are renegotiating Scotland’s membership of the EU what on earth will happen to the industry, which of late has been doing so well?

Only this year, scotch whisky became the first major UK spirit to come under a new EU scheme to protect the term in a similar way to champagne or cognac, which can only be produced in certain areas. But this Spirits Verification Scheme is a UK scheme operated by HM Revenue & Customs, so obviously there is no guarantee it would continue in the same way under independence. In short, there is no guarantee that the EU would recognise scotch whisky’s status – and, as we all know, the EU is a massive market for scotch.

Diageo is said to “have concerns about any developments which could add cost or complexity to our business; and about the possible impact of independence in areas such as the currency, EU membership, regulation and support for exports and international trade”, while Pernod Ricard’s chief, Pierre Pringuet, has said that scotch whisky “is a global industry which is also very fragile” and that the industry was vulnerable to tax laws in other countries that favour home-grown brands. The Scotch Whisky Association has been doing a good impression of treading on egg shells and in its strongest message to date has expressed “major reservations”. Indeed in its annual review, chief executive David Frost says the ramifications of leaving the UK are “huge”.

“Even a temporary interruption of EU membership involving exclusion from the single market or the customs union, if this were a consequence of independence, would be damaging and difficult to manage,” he warns. And as we know Scotland will not be fast-tracked into the EU as Salmond has suggested. The EU accounts for £1.4bn-worth of business (2012) and more importantly it can be exported tariff-free across the European single market and enjoys the benefits from the EU’s ‘clout’ when it comes to trade negations. Additionally Frost points out that the Scottish Government White Paper envisages a network of 70-90 overseas missions, “but we export to around 200 markets”. 

While some Scottish-based companies are in a position to set up satellite operations south of the border, this option is not open to scotch producers, for obvious reasons. However it’s an option that is open for gin producers so Beefeater might not have London to itself, after all. But the more you think about it this independence business is not even a curate’s egg because, unless it fails, it’s bad in all parts.