scotch whisky & scotland's economy a 100 year old blend
TRANSCRIPT
Scotch Whisky & Scotland’s Economy A 100 Year Old Blend
December 2012
1
EXECUTIVE SUMMARY ....................................................................................... 2
A CENTURY OF SCOTCH WHISKY ........................................................................... 2
GOLDEN AGE OF SCOTCH WHISKY ......................................................................... 2
EIGHTIES AND ONWARDS ........................................................................................ 2
ONE CENTURY LATER ............................................................................................. 3
FUTURE PROSPECTS .............................................................................................. 3
CONCLUSIONS ........................................................................................................ 4
1 INTRODUCTION .............................................................................................. 5
2 INDUSTRY TRENDS ....................................................................................... 6
INDUSTRY TRENDS 1912-42 .................................................................................. 6
INDUSTRY TRENDS 1942-1972 .............................................................................. 7
INDUSTRY TRENDS 1982-2012 .............................................................................. 8
3 ECONOMIC IMPACT TRENDS.................................................................... 10
EMPLOYMENT IMPACTS 1912-2012 ..................................................................... 10
RECENT IMPACT TRENDS ...................................................................................... 12
PRODUCTIVITY TRENDS ........................................................................................ 13
PRODUCTIVITY COMPARISONS .............................................................................. 14
4 FUTURE PROSPECTS ................................................................................. 16
SCOTCH WHISKY AND SCOTLAND’S ECONOMY ..................................................... 16
FUTURE TRENDS .................................................................................................. 17
5 CONCLUSIONS ............................................................................................. 20
REFERENCES ..................................................................................................... 21
PUBLICATIONS ...................................................................................................... 21
WEB LINKS ........................................................................................................... 21
APPENDIX ............................................................................................................ 23
2
Executive Summary
A century of Scotch Whisky
The Scotch Whisky Association (SWA) celebrates its centenary year this year, having formed
in 1912. In that year the Scotch Whisky industry employed just under 5,000 people across
Scotland and generated around £3 million in Gross Value Added (GVA). The industry was in
decline, the number of active distilleries in Scotland had fallen by nearly a third from the start
of the century to just 120 by 1912.
The Scotch Whisky industry was devastated
by the two world wars and for around two
years during World War II Scotch Whisky
production was even suspended. After World
War II the Chancellor of the Exchequer
identified “one or two special items such as
whisky” with export potential which could
help to close the dollar gap following the
1949 devaluation of sterling.
Substantial gains were made between 1952
and 1962 with a Scottish Office report
praising the “startling performance” of Scotch
Whisky exports and that the industry had
achieved a “spectacular expansion in output
and exports.”
Scotch Whisky Industry 1912-2012
Year Employment GVA (£m)
1912 4,900 £3
1922 4,900 £5
1932 7,900 £7
1942 4,400 £0.4
1952 9,900 £11
1962 14,200 £38
1972 20,200 £84
1982 19,800 £140
1992 13,100 £650
2002 12,000 £1,055
2012 10,600 £2,918
Golden age of Scotch Whisky
The 1960s and 1970s represented a golden age for the Scotch Whisky industry. By 1972 the
industry accounted for just over 20,000 jobs across Scotland, generated value added of £84
million (GVA) and exports of £228 million. At its peak, Scotch Whisky supported nearly
100,000 jobs directly within the industry and through its supply chains across Scotland.
But the end of the seventies also marked the start of an extended downturn in the Scotch
Whisky industry. This paved the way for significant structural change in the industry.
Eighties and onwards
The eighties saw a dramatic reversal of fortunes for the Scotch Whisky industry compared to
the spectacular performance in the sixties and seventies. Some of the difficulties were
compounded by overproduction in the late seventies and there were clear signs that the
industry had overinvested bringing old distilleries back into use.
3
The disparate nature of the industry made it difficult to develop international brands in
increasingly competitive markets. Following the downturn the Scotch Whisky industry has
undergone a process of consolidation still on-going today. Arguably it is inward investment
and development of international networks that has once again restored Scotch Whisky to the
spectacular performance seen in the seventies.
One century later
Today, the total economic impact of Scotch Whisky on Scotland’s economy is nearly £4.2
billion supporting around 36,000 jobs in the industry and supply chain. Productivity has
accelerated to previously unseen levels, this year (2012) the GVA per worker was
conservatively estimated to be £275,000.
The average Scotch Whisky worker adds nearly five times the value added by workers in
Scotland’s life sciences sector. Workers in the Scotch Whisky industry are 57% more
productive than workers in London’s financial and business services industry.
Economic Impact of Scotch Whisky 2012
Direct Indirect & Induced
Total Impact
Employment 10,600 25,400 36,000
GVA (£m) £2,918 £1,276 £4,193
Future prospects
The economic impact of Scotch Whisky as a share of the Scottish economy is still below the
watermark during the sixties. If the Scotch Whisky industry were to account for a similar
share today, this would add value approaching a further £1 billion. A return to these heights
is not unreasonable given significant new investment in Scotch Whisky production capacity.
Scotch Whisky exports are now Scotland’s largest international export ahead of refined
petroleum (£3.0 billion) and business services (£2.5 billion). Scotch Whisky has underpinned
Scotland’s international export markets overtaking refined petroleum in 2009 and accounting
for 55% of growth since 2002.
Scotch Whisky exports are being sold to countries that are currently growing more quickly
than countries buying other Scottish international exports. Scotch Whisky enjoys an enviable
position with regards to growth markets and is likely to play an increasingly important role in
the story of Scotland’s export markets.
4
Conclusions
The golden age of Scotch Whisky during the sixties and seventies saw a significant rise in
export volumes. The more recent rise of the Scotch Whisky industry has been helped by
rising export values. Even throughout the current global downturn the average value of each
bottle exported has risen by 42% over the last five years. The average value of bottles of
Scotch Whisky sold overseas has risen each and every year since 2007.
It is difficult to identify other drinks industries in Europe, or elsewhere, that have developed
products as high value as Scotch Whisky. Significant capital investment and the reopening of
previously mothballed distilleries suggests Scotch Whisky will play an even greater role in
Scotland’s economy in the future, especially as its growth markets are focused on the high
growth economies of the world.
5
1 Introduction
1.1 During 2012 the Scotch Whisky Association (SWA) celebrates its centenary year,
having formed in 1912. 4-consulting was commissioned by the Scotch Whisky Association
(SWA) to undertake a study of the contribution that Scotch Whisky has made to Scotland’s
economy.
1.2 Previous studies have focused on the economic impact of Scotch Whisky production
during individual years (DTZ Pieda Consulting, January 2003 and Verso Economics, May
2010). This study assesses the impact over the last century providing a timeline to allow a
broader view of development of the industry.
1.3 The history of Scotch Whisky is strongly linked to Scotland’s culture and communities
(4-consulting, July 2011) and development of the industry has been well documented. A
detailed review is given in “The Scotch Whisky Industry Record” (Craig, 1994).
1.4 Cabinet papers over the last century were also reviewed during the preparation of this
report. So whilst regular data is not available it was possible to look at one off surveys and
assessments to build up a picture of how the industry has changed and developed.
Additional data was drawn from the Scottish Government, Office for National Statistics (ONS)
and HM Revenue and Customs. A further description of the data sources is included in the
appendix to this report.
6
2 Industry Trends
Industry trends 1912-42
2.1 One century ago the Scotch Whisky industry employed just under 5,000 people
across Scotland and generated around £3 million in Gross Value Added (GVA). The industry
was in decline with employment having fallen from 6,200 at the start of the twentieth century.
The number of active distilleries in Scotland fell by nearly a third from 159 in 1900 to just 120
by 1912 (Craig, 1994).
2.2 The main cause of the industry’s difficulties was a near collapse in domestic demand.
Domestic demand was influenced by significant rises in excise duty alongside campaigns
against the consumption of alcohol. The volume of spirits produced in the UK for domestic
consumption fell by more than half (56%) from 100 million litres of alcohol in 1900 to 44
million by 1912 (Craig, 1994).
Table 2.1: Scotch Whisky Trends 1912-2012
Year Employment Gross Value
Added (£ million)
1912 4,900 £3
1922 4,900 £5
1932 7,900 £7
1942 4,400 £0.4
1952 9,900 £11
1962 14,200 £38
1972 20,200 £84
1982 19,800 £140
1992 13,100 £650
2002 12,000 £1,055
2012 10,600 £2,918
SOURCE: 4-consulting (data sources appended)
2.3 Attempts by the Scotch Whisky industry to develop overseas markets were stifled by
the outbreak of the First World War, rising taxes on imports of alcohol around the world and
prohibition in the United States from 1919. Weir (1989) describes the UK’s drinks industry as
moribund with “hardly detectable signs of life in the 1920s, and an observable, but still feeble
pulse in the 1930s”.
7
2.4 By 1932 employment had risen to nearly 8,000 jobs and GVA had expanded to £7
million, helped by gradually improving export markets. The onset of World War II saw both
employment (4,400) and GVA (£400,000) fall to their lowest levels seen in the last century.
For around two years during World War II, Scotch Whisky production was even suspended
(The National Archives,1946).
Industry trends 1942-1972
2.5 The importance of Scotch Whisky in helping rebuild the UK’s economy after the war
was noted in a draft white paper presented to parliament by the Minister of Food (The
National Archives, 1946). The UK government sought to allocate grain, mainly barley, to the
Scotch Whisky industry in order to play “a valuable part in the recovery of export markets”.
However, grain was in short supply and the government could only provide a limited allocation
with the Minister warning that would result in a “consequent reduction in the capacity to earn
foreign currency”.
2.6 Between 1942 and 1952 the number of Scotch Whisky industry jobs more than
doubled from 4,400 to 9,900 with a near thirty fold increase in value added (GVA) from £0.4
million to £11 million. By 1952 exports of Scotch Whisky had reached £33 million1 up from
£11 million at the end of World War II.
2.7 An economic survey presented to parliament by the Chancellor of the Exchequer
(The National Archive, 1950) identified “one or two special items such as whisky” as
established exports to North America. The survey suggested these special items could help
to close the dollar gap following the 1949 devaluation of sterling.
2.8 Further substantial gains were made between 1952 and 1962 with employment
expanding to 14,000 jobs, GVA increasing to £38 million and exports rising to £81 million. A
Scottish Office report on Scotland’s economy (The National Archives, 1965) praised the
“startling performance” of Scotch Whisky exports during the 1950s stating that “The Scotch
Whisky industry has achieved a spectacular expansion in output and exports.”
2.9 Jones (2002) suggests the “1960’s and 1970’s represented a ‘golden age’ for the
Scotch Whisky industry”. By 1972 the industry accounted for just over 20,000 jobs across
Scotland, generated value added of £84 million (GVA) and exports of £228 million. But the
end of the seventies also marked the start of an extended downturn in the Scotch Whisky
industry, paving the way for significant structural change in the industry.
1 Gross Value Added (GVA) is a net measure (including exports) from which the costs of
production (including imports) are deducted, hence export values have frequently exceeded GVA.
8
Industry trends 1982-2012
2.10 In 1982 Scotch Whisky GVA had risen to £140 million with industry exports growing
to £872 million. Between 1952 and 1982 Scotch Whisky exports grew around twice as
quickly as value added (GVA) as the industry moved firmly towards overseas markets.
2.11 The eighties saw a dramatic reversal of fortunes for the Scotch Whisky industry
compared to the spectacular performance in the sixties and seventies. By 1982 employment
had already fallen to 19,800 jobs and would decline more sharply in the mid to late eighties
but GVA continued to rise.
2.12 Some of the difficulties were compounded by overproduction in the late seventies,
stocks had continued to rise until by 1980 “they were equivalent to more than ten years
production” (Jones, 2002). By the eighties there were clear signs that the industry had
overinvested bringing old distilleries back into use.
2.13 Jones (2002) outlines a scenario where many smaller distillers supplied limited
quantities of their single malts. Larger blenders, including The Distillers Company Limited
(DCL), sold their products through marketing subsidiaries. The blending and marketing
operations of DCL comprised around 40 marketing subsidiary companies. The disparate
nature of the industry made it difficult to develop international brands in increasingly
competitive markets.
2.14 Following the downturn during the eighties, until the present day, the Scotch Whisky
industry has undergone a process of consolidation. The majority of distilleries are now under
the ownership of larger enterprises with extensive overseas operations. Arguably it is this
inward investment and development of international networks that has once again restored
Scotch Whisky to the spectacular performance seen in the seventies.
2.15 Table 2.2 provides a more recent assessment of annual industry GVA and
employment. The direct value of the Scotch Whisky industry is now approaching £3 billion.
Employment is also showing signs of rising, on the back of significant capital investment and
the reopening of previously mothballed distilleries.
2.16 Diageo’s new bottling plant in Leven opened earlier this year (2012) with the plant
supporting around one thousand on-site jobs. Diageo also announced a £1 billion investment
package this year to increase Scotch Whisky production capacity including the expansion of
around half of its malt Scotch Whisky distilleries and the building of a new distillery.
2.17 Chivas Brothers is also undertaking a significant investment programme including
reopening the mothballed Glen Keith distillery in Banffshire next year. The investment will
also see an expansion in existing distilleries and the opening of a new bottling hall in Paisley.
9
2.18 A number of new developments are also underway including the Adelphi Distillery at
Glenbeg in Ardnamurchan. The Ardnamurchan distillery was granted planning consent
earlier this year and includes warehousing and a visitor centre. The number of investment
projects becoming operational this year may explain the slight rise in employment during
2012.
Table 2.2: Scotch Whisky Trends 2000-2012
Year Employment Gross Value
Added (£ millions)
2000 10,700 -
2001 11,000 -
2002 12,000 £1,055
2003 11,700 -
2004 10,800 -
2005 10,600 -
2006 12,000 -
2007 11,800 -
2008 10,300 £2,697
2009 10,700 £2,807
2010 10,300 £2,684
2011 10,100 £2,805
2012 10,600 £2,918
SOURCE: 4-consulting (data sources appended)
10
3 Economic impact trends
Employment impacts 1912-2012
3.1 Tables 3.1 and 3.2 outline the economic impact of the Scotch Whisky industry over
the last century. Indirect impacts show the employment and value (GVA) generated through
the links between businesses in the Scotch Whisky supply chain. For example, distilleries
purchase cereals and logistics services providing income to farms and hauliers.
3.2 Induced effects arise through the spending of workers employed either directly in the
Scotch Whisky industry or in the supply chain. For example, workers in a bottling plant will
support jobs on the high streets of towns around the plant through local spending. Taken
together the direct, indirect and induced effects show the overall impacts outlined in Tables
3.1 and 3.2.
Table 3.1: Scotch Whisky Employment
Year Direct Indirect & Induced Total
1912 4,900 38,500 43,400
1922 4,900 38,500 43,400
1932 7,900 57,000 64,900
1942 4,400 27,500 31,900
1952 9,900 56,600 66,500
1962 14,200 55,900 70,100
1972 20,200 78,000 98,200
1982 19,800 75,100 94,900
1992 13,100 40,500 53,600
2002 12,000 20,500 32,500
2012 10,600 25,400 36,000
SOURCE: 4-consulting
3.3 The employment impact of the Scotch Whisky industry peaked during the “golden
age” in the late seventies with around 100,000 jobs. Production was at its peak generating
jobs directly within the industry, but induced and indirect effects were also important. The
agricultural sector has always been a key supplier to the Scotch Whisky industry. Substantial
productivity gains over the last century have significantly reduced the number of supply chain
agricultural jobs.
11
3.4 Over the last thirty years Scotland’s economy has become increasingly open and
woven into the global economy. In the seventies the Scottish economy was less open, most
people bought their shopping on the local high street and holidays abroad were a rare luxury.
In a more closed economy indirect and induced effects tend to be much larger as spending is
recycled among local businesses.
3.5 The latest Scottish Government multipliers show that in 2007 every 100 jobs in the
Scottish spirits and wine industry sustained 260 jobs across Scotland (Table A.1 appended).
Nearly a decade earlier 100 jobs in the Scottish spirits and wine industry sustained 279 jobs
across Scotland and nearly two decades earlier the equivalent figure was 474 jobs. A set of
data for the UK economy in 1841 (Horrell et al, 1994) showed 100 jobs directly in the UK’s
food, drink and tobacco industry sustained a total of 950 jobs across the UK.
3.6 Table 3.2 shows the latest estimate of economic impact for the Scotch Whisky
industry stood at nearly £4.2 billion for 2012. The changes shown in Table 3.2 should be
treated with some caution as GVA is shown in current prices with no account made for
inflation.
Table 3.2: Scotch Whisky Gross Value Added (£ millions)
Year Direct Indirect & Induced Total
1912 £3 £5 £8
1922 £5 £8 £13
1932 £7 £13 £20
1942 £0.4 £1 £1
1952 £11 £19 £30
1962 £38 £68 £106
1972 £84 £149 £233
1982 £140 £249 £389
1992 £650 £390 £1,040
2002 £1,055 £554 £1,609
2012 £2,918 £1,276 £4,193
SOURCE: 4-consulting
3.7 More recent evidence (Verso Economics, 2010) shows that most Scotch Whisky
multipliers are slightly higher than those published for the wider Scottish spirits and wines
industry. The difference may be partly attributed to more of the Scotch Whisky industry’s
supply chain being based in Scotland compared to other drinks.
3.8 The difference may also be partly explained by a gradual movement of activities north
of the border in recent years, as the spirits industry consolidates to the benefit of Scotland.
Diageo's new bottling plant in Leven includes six bottling lines and is also used for Diageo's
vodka and gin brands.
12
3.9 Producing inflation adjusted estimates of the value added by Scotch Whisky should
ideally take account of the changing prices of whisky sold and the changing prices of inputs to
production (cereals, labour, distribution). This is likely to be a complex and data hungry task,
instead Table A.2 (appended) uses simple economy-wide GDP deflators published by HM
Treasury to adjust the total impact figures shown in Table 3.2.
3.10 After adjusting for inflation the overall impact of Scotch Whisky more than doubled
between 2002 and 2012 with value added in 2012 nearly two and half times that of 2002.
This nearly matched the highest post World War II growth seen between 1952 and 1962
where the value added in 1962 was just over two and half times that of 1962. The inflation
adjusted figures also show three decades where the Scotch Whisky industry contracted
significantly including 1912-22, 1932-42 and 1972-82.
Recent impact trends
3.11 Tables 3.3 and 3.4 provide a more recent assessment of the annual employment and
GVA impacts of the Scotch Whisky industry. The Scotch Whisky industry now sustains
around 36,000 jobs across Scotland with the overall employment impact now at its highest
level for over a decade. Our estimates suggest that the overall employment impact was last
higher fifteen years ago in 1997 at around 37,000 jobs.
Table 3.3: Scotch Whisky Impact on Scottish Employment
Year Direct
Employment Indirect & Induced
Employment Total Employment
2000 10,700 18,700 29,400
2001 11,000 19,000 30,000
2002 12,000 20,500 32,500
2003 11,700 19,700 31,400
2004 10,800 18,000 28,800
2005 10,600 17,400 28,000
2006 12,000 19,500 31,500
2007 11,800 18,900 30,700
2008 10,300 24,600 34,900
2009 10,700 25,300 36,300
2010 10,300 24,600 34,900
2011 10,100 24,100 34,200
2012 10,600 25,400 36,000
SOURCE: 4-consulting
3.12 The economic impact of Scotch Whisky rose to just under £4.2 billion in 2012 buoyed
by export markets. The economic impact comprised £2.9 billion of GVA directly within the
Scotch Whisky industry and nearly £1.3 billion in indirect (supply chain) and induced
(employee spending) effects.
13
Table 3.4: Scotch Whisky Impact on Scottish Gross Value Added (£ millions)
Year Direct Indirect & Induced
Total
2008 £2,697 £1,179 £3,876
2009 £2,807 £1,227 £4,033
2010 £2,684 £1,173 £3,857
2011 £2,805 £1,226 £4,031
2012 £2,918 £1,276 £4,193
SOURCE: 4-consulting
Productivity trends
3.13 Table 3.5 below shows GVA per worker from 1912 to 2012 based on the direct
figures from Tables 3.1 and 3.2. The figures are shown in constant 2012 prices based on HM
Treasury’s GDP deflators. There was relatively little improvement in productivity until the
1990s. The Scotch Whisky industry faced considerable challenges early in the twentieth
century and suffered during the 1940s and early in the 1950s due to World War II.
3.14 The rise of the Scotch Whisky industry during the late 1950s through to the 1970s
appears to have been based on expanding volume rather than value. Since the beginning of
the 21st century industry productivity has increased sharply and this is reflected in the rising
average value per bottle, particularly in export markets.
Table 3.5: GVA (2012 prices) per Worker
Year Direct
1912 £50,000
1922 £40,000
1932 £42,000
1942 £3,000
1952 £22,000
1962 £38,000
1972 £36,000
1982 £16,000
1992 £66,000
2002 £94,000
2012 £275,000
SOURCE: 4-consulting
14
3.15 Table 3.5 shows productivity has accelerated to previously unseen levels, this year
GVA per worker was estimated to be £275,000. The latest Scottish Government estimate for
2010 (see web links) suggests productivity per worker in the spirits industry may be as high
as £289,000 GVA per worker. The estimate of £275,000 GVA per worker is therefore in line
with official estimates.
Productivity comparisons
3.16 The Scottish Government has identified growth sectors as part of the latest
Government Economic Strategy (see web links). The strategy emphasises the need to target
support towards growth sectors as the sectors have “the potential to drive sustainable growth
in the long-term …”.
3.17 The growth sectors include financial & business services, life sciences, energy,
sustainable tourism, creative industries and food & drink (including Scotch Whisky). Table 3.6
shows GVA per employee for Scotland’s growth sectors in 2010, published by the Scottish
Government, benchmarked against the Scotch Whisky industry.
Table 3.6: Productivity Comparisons
Sectors GVA per Employee
Energy £380,000
Scotch Whisky £275,000
Financial & Business Services £179,000
Food & Drink (inc. Whisky) £80,000
Life Sciences £57,000
Creative Industries £45,000
Sustainable Tourism £18,000
SOURCE: Scottish Government (Annual Business Survey) and 4-consulting
3.18 Energy is Scotland’s only growth sector with higher productivity than the Scotch
Whisky industry, and this is driven by oil and gas. The average Scotch Whisky worker adds
nearly five times the value added by the average worker in Scotland’s life sciences sector.
The Scottish Government figures (based on the Annual Business Survey) for financial and
business services exclude some banking activities (see web links) which has the effect of
increasing the productivity figure. Despite this, the Scotch Whisky industry exhibits
productivity figures that are still 54% higher than the productivity measure shown for
Scotland’s financial and business services.
15
3.19 The latest Business Register and Employment Survey (BRES) data for 2010 shows
325,000 employees in financial and business services in London. The latest ONS figures for
GVA (unsmoothed) covering financial and business services in London (also for 2010) is
£56,626 million. This suggests GVA per employee of around £174,000. Workers in the
Scotch Whisky industry are therefore 57% more productive than workers in London’s financial
and business services industry.
3.20 Value added (GVA) per employee job calculations can be made based on Eurostat’s
databases (see web links). The Eurostat data show that the Netherlands has the most
productive food and drink sector in Europe adding around £82,000 (GVA) per employee job
during 2009 (€1=£0.80). This figure is only marginally ahead of Scotland’s food and drink
sector (Table 3.6), it is therefore reasonable to suggest that Scotland is one of Europe’s
leading economies in food and drink production.
3.21 Detailed data for the drinks industries across Europe is limited. The latest data from
the National Institute of Statistics and Economic Studies (INSEE) in France suggests the
drinks industry generated around £72,000 per employee during 2010. It is difficult to identify
other drinks industries in Europe, or elsewhere, that have developed products as high value
as Scotch Whisky (£275,000).
16
4 Future Prospects
Scotch Whisky and Scotland’s economy
4.1 Recent trends may suggest the Scotch Whisky industry has moved into another
“golden age”. But Table 4.1 shows the economic impact of Scotch Whisky as a share of the
Scottish economy is still below the watermark of 4.4% during the sixties and 4.2% during the
seventies. Estimates of the overall value of Scotland’s economy are appended.
4.2 If the Scotch Whisky industry were to account for around 4.2% to 4.4% of Scotland’s
economy, this would add value approaching a further £1 billion and potentially support new
jobs. This scenario is not unreasonable and may become a reality given recent
announcements of significant new investment in Scotch Whisky production capacity.
Table 4.1: Impact % Scottish GVA
Year Scotch Whisky Impact % of Scottish Economy
1912 2.5%
1922 2.2%
1932 3.9%
1942 0.1%
1952 2.0%
1962 4.4%
1972 4.2%
1982 1.6%
1992 2.2%
2002 2.1%
2012 3.8%
SOURCE: 4-consulting
4.3 International exports of manufactured goods from Scotland are shown in Table 4.2
based on the latest Global Connections survey (Scottish Government, 2012). The latest data
is only available up to 2010 and the earliest data is available from 2002. Scotch Whisky
accounted for nearly one quarter (24.3%) of Scotland’s manufactured international exports,
nearly doubling its share (12.8%) since 2002.
4.4 Scotch Whisky exports overtook international exports of refined petroleum (and other
chemicals) in 2009. The 2010 global connections survey identified Scotch Whisky as
Scotland’s largest international export ahead of refined petroleum (£3.0 billion) and business
services (£2.5 billion).
17
Table 4.2: International Scottish Exports
Year Scotch Whisky
Refined Petroleum
Manufactured Exports
Whisky Share of Man. Exports
2002 £1,860 £2,325 £14,545 12.8%
2004 £2,035 £2,435 £12,585 16.2%
2006 £2,125 £2,675 £11,810 18.0%
2008 £2,805 £3,470 £13,490 20.8%
2010 £3,330 £3,010 £13,680 24.3%
SOURCE: Global Connections Survey 2010 (Scottish Government)
4.5 Total international exports (including manufacturing and services) rose from £19.3
billion in 2002 to £22.0 billion by 2010, a rise of 14%. Over the same period international
exports of Scotch Whisky rose by 79% or just under £1.5 billion. Scotland’s international
exports have struggled over the last decade as electronics manufacturing has declined.
4.6 The surge in Scotch Whisky has underpinned Scotland’s international export markets
accounting for 55% of growth between 2002 and 2010. More recent data available from the
Scotch Whisky Association (SWA) suggests international exports rose again in 2011. The
Scotch Whisky industry is likely to continue to play an important role in Scotland’s
international trade.
Future trends
4.7 Table 4.3 shows the top 10 international export markets for Scotch Whisky (Scotch
Whisky Association, October 2012) and for the wider Scottish economy (Scottish
Government, January 2012). The figures for Scotch Whisky and wider Scottish exports cover
the calendar years 2011 and 2010 respectively.
4.8 The top exports markets for Scotch Whisky in 2011 were similar to those for 2010
with the USA and France the largest markets in both years. However, the value of exports to
Singapore increased by 44% between 2010 and 2011 overtaking exports to Spain. Exports to
Taiwan rose by 44% overtaking exports to Germany. Brazil and Venezuela moved into the
top 10 Scotch Whisky export markets with growth of 48% and 33% respectively.
18
Table 4.3: Top 10 International Export Markets (£ millions)
Scotch Whisky Scottish Economy
Country Value Country Value
USA £655 USA £3,530
France £535 Netherlands £2,365
Singapore £318 France £1,530
Spain £259 Germany £1,265
South Africa £166 Belgium £985
Taiwan £155 Norway £815
Germany £150 Spain £710
South Korea £143 Italy £570
Brazil £99 Ireland £550
Venezuela £83 Switzerland £520
SOURCE: Scotch Whisky Association & Global Connections Survey (Scottish Government)
4.9 Real economic growth figures for last year (2011) for each of the countries in Table
4.3 were taken from the World Bank’s databank (see web links). The growth figures were
weighted by the value of international exports for both Scotch Whisky and the wider Scottish
economy. The weighted real economic growth for Scotch Whisky markets in 2011 was
around 2.5% compared to around 1.5% for Scottish international export markets. This
suggests that Scotch Whisky exports are being sold to countries that are growing more
quickly than countries buying other Scottish international exports.
4.10 A similar calculation was applied using economic growth forecasts published by the
International Monetary Fund (IMF) for 2017 (see web links). The weighted real economic
growth for Scotch Whisky markets for the next five years was around 2.6% compared to just
under 1.7% for Scottish international export markets. This suggests that Scotch Whisky
exports are being sold to countries that are likely to grow more quickly in the future.
4.11 The Global Connections Survey also measures goods and services sold by
Scotland’s economy to the rest of the UK. If the value of sales to the rest of the UK are
treated as exports then nearly one fifth (19.7%) of the value of all Scotch Whisky “exports” are
sold to the rest of the UK. The latest data from the SWA (based on HMRC data) suggest
around 7% of Scotch Whisky sales by volume are to the rest of the UK.
4.12 Over two thirds of the value of all Scottish exports (67.2%) are sold to the rest of the
UK. If “exports” to the rest of the UK are included in the above growth calculations then the
gap becomes more prominent with economic growth in Scotch Whisky markets around
double that of all Scottish exports.
19
4.13 Although Scotch Whisky operates in increasingly competitive international markets, it
enjoys an enviable position with regards to growth markets and is likely to play an
increasingly important role in the story of Scotland’s export markets.
20
5 Conclusions
5.1 The Scotch Whisky industry has undergone significant changes over the last century
but still faces many of the same challenges. There have been well documented struggles
with sweeping changes in legislation, taxes and rapid developments in overseas markets.
5.2 Distillery owners have to invest in capacity based on the likely market demand
several years ahead. On a number of occasions this led to overcapacity and protracted
downturns in the industry as demand failed to materialise.
5.3 The golden age of Scotch Whisky during the sixties and seventies saw a significant
rise in export volumes. The more recent rise of the Scotch Whisky industry has seen a more
marked rise in export values. Even throughout the current global downturn the average value
of each bottle exported has risen by 42% over the last five years (Scotch Whisky Association,
October 2011).
5.4 The rising value of exports has underpinned substantial productivity gains over the
last twenty years. Scotch Whisky is now the second most productive sector in Scotland
behind only energy, fuelled by oil & gas. Workers in the Scotch Whisky industry are more
productive than workers in London’s financial and business services industry.
5.5 It is difficult to resist the conclusion that since the eighties, investment by enterprises
with extensive overseas operations has helped better develop international networks and
export markets. These developments have coincided with increasing overseas demand for
higher value products.
5.6 Scotch Whisky is well aligned to growth markets and has accounted for over half the
growth of all Scotland’s international exports since 2002. Significant capital investment and
the reopening of previously mothballed distilleries suggests Scotch Whisky will play an even
greater role in Scotland’s economy in the future, especially as its export growth is focused on
the high growth economies of the world.
21
References
Publications
Crafts N. F. R. (March 2004a) Regional GDP in Britain, 1871-1911: Some Estimates, Working
, Department of Economic History, London School of Economics
Crafts N. F. R. (March 2004b) Market Potential in British Regions 1871-1931, Working Paper
No. 04/04, Department of Economic History, London School of Economics
Craig H. C. (1994) The Scotch Whisky Industry Record
DTZ Pieda Consulting (January 2003) The Economic Impact of the Production of Scotch
Whisky, Gin and Vodka in Scotland
Jones S. R. H. (September 2002) Brand Building and Structural Change in the Scotch Whisky
Industry, Dundee Discussion Papers in Economics
Horrell S., Humphries J., Weale (August 1994) An Input-Output Table for 1841, The
Economic History Review, New Series, Vol. 47, No. 3, pp. 545-566
The National Archives CB/129/8, Minister of Food (March 1946) Draft White Paper On The
World Food Shortage
The National Archives CAB/129/38, Chancellor of the Exchequer (March 1950) Economic
Survey for 1950
The National Archives CAB/129/123, Secretary of State for Scotland (December 1965) The
Scottish Economy 1965-70: Draft White Paper
Scotch Whisky Association (October 2012) Statistical Report 2011
Scottish Government (January 2012) Scotland’s Global Connections 2010
Verso Economics (May 2010), The Economic Impact of Scotch Whisky Production in
Scotland
Weir R., (1989) Rationalization and Diversification in the Scotch Whisky Industry, 1900-1939:
Another Look at 'Old' and 'New' Industries, Economic History Review Series, 42, 375-395
Web links
Eurostat Statistics Database
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
International Monetary Fund, Data & Statistics
http://www.imf.org/external/data.htm
22
Scottish Government: Government Economic Strategy
http://www.scotland.gov.uk/Publications/2011/09/13091128/0
Scottish Government: Gross Value Added definition
www.scotland.gov.uk/Topics/Statistics/16170/4380
Scottish Government: Input-Output tables
www.scotland.gov.uk/Topics/Statistics/Browse/Economy/Input-Output
Scottish Government: Profile of Scottish Spirits Sector
www.scotland.gov.uk/Resource/Doc/933/0086587.xls
Scottish Government: Profile of Scottish Spirits Sector (updated)
http://www.scotland.gov.uk/Topics/Statistics/Browse/Business/SABS/SpiritsProfile
Office for National Statistics: What is Gross Value Added?
www.statistics.gov.uk/cci/nugget.asp?id=254
World Bank Databank
http://databank.worldbank.org/ddp/home.do
23
Appendix
Employment and GVA multipliers were used drawing on the previous economic impact report
(Verso Economics, 2010) and sources shown in Table A.1. The most appropriate multiplier
for each year from 1912 to 2012 was used with the multiplier from 1841 used in 1912 and
multipliers from the previous economic impact report used from 2008 onwards.
Scotch Whisky industry data for employment and GVA was based on a wide range of sources
with the data for 2008 taken from the previous economic impact report (Verso Economics,
2010). Estimates of employment data from 1971 onwards were available from the Business
Register & Employment Survey (BRES), Annual Business Inquiry (ABI), Annual Employment
Survey (AES) and Census of Employment (COE).
Earlier estimates for both output and employment were available from Weir (1989) from 1912
to the 1940s. Estimates for the 1950s and 1960s were based on measures of the Scotch
Whisky industry drawn from the 1950 Scottish economic survey (March 1950) and the draft
white paper “The Scottish Economy 1965-70” (December 1965). Additional estimates for
Scotch Whisky industry output were drawn from the Annual Business Survey (ABS) published
by the Scottish Government and data on prices and output volumes taken from Craig (1994)
and the Scotch Whisky Association.
Table A.1: Selected Employment Multipliers (Type II)
Year Country & Sector Multiplier
1841 UK Food, Drink & Tobacco 9.50
1989 Scotland Spirits & Wine 4.74
1998 Scotland Spirits & Wine 2.79
2007 Scotland Spirits & Wine 2.60
SOURCE: 4-consulting
24
Table A.2: Table 3.2 in 2012 prices (£m)
Year Total GVA Impact
1912 £626
1922 £514
1932 £925
1942 £36
1952 £592
1962 £1,519
1972 £2,004
1982 £890
1992 £1,377
2002 £1,715
2012 £4,193
SOURCE: 4-consulting
Table A.3: Scottish Economy (£bn)
Year GVA
1912 £0.3
1922 £0.6
1932 £0.5
1942 £1.2
1952 £1.5
1962 £2.4
1972 £5.6
1982 £24.6
1992 £48.2
2002 £75.9
2012 £111.8
SOURCE: (2012 4-consulting estimate)
Measures of Scotland’s economy were taken directly from Crafts (b) (March 2004) for 1912 to
1932. Estimates for 1941 and 1951 were based on data from Crafts (b) (March 2004) and the
estimate for 1961 was based on Scottish Government data for GDP at constant prices
(adjusted for inflation). Estimates for 1972 and 1982 were based on Crafts (a) (March 2004)
and 1992 and 2002 were based on ONS figures for regional (GVA). The estimate for 2012
was based on the most recent Scottish GDP data available for 2011 and 2012 and economic
activity indicators for the last quarter of 2012.
25
The Scottish Government’s most recent cash estimate of GDP was £109 billion for 2011
which is similar to the estimate of £111.8 billion shown in Table A.3 for 2012. The same
source of data shows a cash estimate of GDP of £74 billion during 2002 which is also similar
to the estimate of £75.9 billion for 2002 from Table A.3.