Britain’s economy has been buffeted by the effects of Brexit, the war in Ukraine and, most recently, the government’s dramatic reversal on a series of planned tax cuts that led to the resignation of Prime Minister Liz Truss.
However, for Scotland’s whisky producers, business is booming, and the British pound’s precipitous decline against major currencies is providing an extra boost, making whisky more affordable for buyers outside Britain. John Stirling, co-founder of Arbikie Distillery in Scotland states, “The currency has had a major effect — there’s no question about that”.
According to government data, the volume of whisky exports from Britain has grown over the past two years. As a result, there’s been a notable 10.5% increase over the past year alone. The demand for Scotch has seen a rapid increase, with exports now accounting for 65% of the country’s spirits industry exports. 20 distilleries have opened in six years in Scotland, bringing the total number of distilleries to 141.
As demand for Scotch rises, the pound is trading near historically weak levels. Last month, the pound briefly sank to $1.035, a new low against the dollar in response to Truss’s economic overhaul, which included £45 billion ($50 billion) in unfunded tax cuts. Her government later scrapped almost all the planned cuts, but it was too late—the pound’s decline had already sent shockwaves through international currencies such as those used in France, Taiwan, India and China.
In the year ending in July, 18% of whisky exports, by value, went to the US. Britain is also facing systemic economic issues like weak productivity, low pay growth, a shortage of workers and unsteady business investment since the country voted to leave the EU in 2016. On Wednesday, the government reported that the country’s consumer prices were 10.1% higher than they were a year ago – partly due to food prices which had their largest increase in more than 40 years.
Though the fight continues against high inflation, the IMF predicts that next year’s British economy will contract to 0.3 percent. Despite this, whisky companies have been able to weather the economic tempest and have flourished amidst a downturn in the global markets.
Approximately 90 per cent of Scotch is exported, according to the Scotch Whisky Association, the trade body for the industry. Total revenue in the Whisky segment amounts to US$81.21bn in 2022. The market is expected to grow annually by 9.18% (CAGR 2022-2025). In global comparison, most revenue is generated in India (US$17,660.00m in 2022).
Despite current news and economic uncertainty, the whisky market yet again seems to be heading for a steady ride against today’s volatile market.
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