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Scotch Whisky and Independence

Scottish independence would impact the reputation of companies in the Scotch Whisky industry by potentially affecting perceptions of these companies’ products and operational capabilities. Perceptions of these companies would be affected through doubts over their ability to sell freely into EU markets, a possible increase in competition and a potential for the standards associated with Scotch Whisky products to be diluted.

Currently, Scotch Whisky is protected under EU rules regarding geographical indication. Scotch Whisky sold anywhere in the EU must have been produced in Scotland and must follow rigid quality assurance guidelines. Outside the EU many countries have signed agreements with the Union requiring those countries to respect these rules. If Scotland were to leave the UK, there is no guarantee that it would automatically enter the EU, especially considering likely objections from countries with their own secessionist movements such as Spain.

These rules create barriers to entry in the Scotch market, which benefit Scottish distillers. Without these barriers to entry these companies would likely attract more competitors with the possibility that Whisky produced elsewhere could legally refer to itself as Scotch. Extra competition would affect perceptions of Scotch Whisky from a financial performance perspective.

Additionally, unregulated Scotch Whisky competition has the potential to impact on general perceptions of the spirit. Without the protection of EU rules, Scotch could be produced elsewhere, without the same standards currently required. In this scenario, drinks labelled as Scotch could well become variable in quality, this would affect consumer perceptions of Scotch as a product with possible ramifications for the reputation of brands across the sector .

If Scotch Whisky is no longer guaranteed to be of a certain standard, much of the reputational capital for the product could be lost. Conversely, this may pose an opportunity for companies involved in whisky that retains its protected status, especially Irish Whiskey. Similarly, companies such as Brown Forman that are involved in the Bourbon market may stand to gain. Any reduction in positive reputational capital for individual products would certainly negatively impact on sentiment towards companies involved in Scotch Whisky production.

If Scotland were to leave the UK and EU, there would be various questions raised as to the operational capabilities of Scotch Whisky companies. As an independent country, Scotland would not necessarily enjoy free access to the EU and EEA markets of over half a billion, generally well-off consumers. This would no doubt impact on the operations of these companies negatively.

Additionally, if Scotland were to be forced to develop its own currency, exchange rate risk would be increased. The Pound Sterling is a relatively large and stable currency, any Scottish currency would no doubt be less so with implications for all companies exporting from Scotland. Scotch Whisky exports are worth £4.3bn to the sector annually; any questions around the ability of these companies to export their products would surely generate negative sentiment toward them, especially from a financial standpoint.

Membership of the UK and the EU provides Scotch Whisky companies with unimpeded access to the world’s largest free trade area, as well as providing direct protection and safeguards for the product itself. Leaving the Union, and the accompanying access and safeguards it provides, would certainly impact on the reputation of companies across the sector.

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