Whisky and Brexit an Uncertain Cocktail as Scotch Exports Jump

(Bloomberg) -- Brexit is a double-edged sword for the Scotch whisky industry.

While sterling’s slide after Britain’s vote to leave the European Union boosted exports of the spirit to a record last year, the industry faces the risk of losing benefits in a number of important markets if the U.K. is outside the EU’s network of bilateral trade deals.

“During the process of the U.K. exiting the EU, the Scotch whisky industry will face challenges, although there are also potential opportunities if the industry’s priorities are delivered,” the Scotch Whisky Association said in a statement Friday.

Whisky and Brexit an Uncertain Cocktail as Scotch Exports Jump

Scotch is Britain’s largest food and drinks export, bringing in more than 4 billion pounds ($5.3 billion) a year. Shipments rose 4 percent in 2016, and are set to get a further boost should sterling remain at current depressed levels. Yet the spirit could lose favorable tariff treatment in countries such as South Korea, South Africa and Colombia when it ceases to be covered by the EU’s free trade agreements. Together, about 10 percent of shipments could be affected.

Under World Trade Organization rules, Scotch will continue to benefit from zero tariffs on exports to markets such as the EU after the U.K.’s exit from the bloc. The same is true of the U.S., the spirit’s largest market by value worth an annual 856 million pounds, where single malt brands such as Pernod Ricard SA’s Glenlivet and Edrington Group Ltd.’s Macallan helped exports in that category soar to more than 1 billion pounds last year.

While currency shifts are likely to have been a positive skew to exports, any fundamental shift in demand may be more apparent in 2017, the SWA said.