What if the Scots walk?

When Scotland wakes up on September 19, voters will have decided whether to break away from the UK and set out as an independent nation, opening the prospect of differing tax regimes and currencies on each side of the border. Both sides of the political debate are already being hotly discussed, but many issues remain unclear, including the implications for drinks retailers.

The Scotch Whisky Association, already challenging the Scottish government in the courts over proposals for minimum unit pricing of alcohol, wants both Westminster and Holyrood to answer questions although, like the Wine & Spirit Trade Association, it is adopting a neutral political stance.

Rosemary Gallagher, SWA spokeswoman, said: “We are asking for clarity from both governments so we can weigh up the likely impact on the industry.

“Questions for governments to address include membership of the EU and World Trade Organisation, and currency and governmental structures.”

The SWA carries clout in Scotland, with Scotch whisky currently contributing £1 billion in revenue to the UK Exchequer.

Andrew Lundy of Vino, an independent wine retailer with four branches in Edinburgh, agrees on the need for clarity: “At the moment anything being discussed is theoretical, as there’s no tangible evidence of what might actually happen after independence. Even the Scottish government’s manifesto is very woolly.”

In the manifesto – the White Paper – there is only a small mention of alcohol, stating that independence would “allow us to do more to tackle major causes of ill-health”.

It continues: “We will have greater scope and clearer powers to regulate alcohol and tobacco, including through taxation – reducing the opportunities for legal challenge, which have held up several of our initiatives to date.”

In a statement to OLN, a Scottish government spokesman clarified this position, saying: “The Scottish government strongly believes that the most effective alcohol price measures are a combination of excise duties and minimum price controls. As part of a concerted package of measures, a minimum price per unit of alcohol will be an effective and efficient way to tackle alcohol misuse in Scottish communities.”

The implementation of MUP is currently being challenged by the SWA on the basis that it contravenes European legislation, and the Scottish government is defending its position in court, but that could take years to conclude.

An independent Scotland would take on full fiscal responsibility, so there is potential for further rises in duty, but with Scotch whisky perhaps retaining a special status. The SNP is currently backing an end to the UK government’s alcohol duty escalator and calling for the chancellor to stop further rises in duty on Scotch whisky in the 2014 budget.

Beyond taxation, a UK government report argues that an independent Scotland would “need to adapt to new requirements for jobs and trade”, which “would create uncertainty and potentially impose additional costs, especially for firms that trade and recruit ‘across the border’”.

There has been a lot of scrutiny in recent weeks of the major supermarkets, whose headquarters are outside Scotland, but serving a UK-wide estate. Both Tesco and Sainsbury’s distanced themselves from reports that supermarket prices would rise in their Scottish branches following independence, while Asda and Morrisons both said they also had no plans to increase prices.

Oddbins, with nine of its 34 branches in Scotland, confirmed to OLN that “our position on this issue at the moment is very much business as usual and it is our intention to continue trading in Scotland whatever the outcome of the referendum”.

Beyond this, the major retailers have been reluctant to discuss matters further, wary of becoming embroiled in an increasingly rough political debate. Some members of the Scottish trade are privately acknowledging that this sensitivity is limiting informed debate on the independence issue.

Agencies and distributors are also largely unwilling to engage openly on the issue, with others saying they are waiting until after the referendum to make decisions.

James Kowszun, finance director of Bibendum, said: “Even if the Yes Scotland campaign wins the referendum, Scotland would not become independent until March 2016. Until we know the result and the specific details of any subsequent deal between Westminster and Holyrood there is little to be gained by speculating about the impact on our business.

Once we know the facts we will be able to respond in the best way for our customers.”

However, a number of producers with major brands are known to be exploring contingency plans to take account of post-independence realities and ensure they can understand the new landscape and secure distribution channels.

While businesses with an English head office are largely pushing the “business as usual” message, some retailers with a Scottish headquarters, and a large client base south of the border, are expecting more problems.

Exel Wines has retail premises in Perth, but the bulk of its business is from its online store, with more than 9,000 wines, beers and spirits. Its strongest customer base is in the south of England. Whether independence happens or not, Scotland already has distinct licensing laws, which include a ban on multibuy discounts, so Exel is unable to offer by-the-case discounts to its customers, in contrast to companies with warehousing south of the border.

General manager Russell Wallace said: “To Scotland’s disadvantage we are hoping that in the future we can perhaps move our dispatch warehouse to England in a large part, because of this exact issue.

“It worries me a great deal that there could be a many more of these types of necessary decisions to be made in the future. I would rather be able to maintain all our operations in Scotland, creating employment and wealth within our local community, but the bottom line has to be what is best for the company and our ability to make the best service offer to our clients.”

He added that, in an independent Scotland, the option to relocate would become more difficult, potentially requiring the business to register a new company in England.

Billy Bell, managing director of Edinburgh- based Wine Importers, which does the bulk of its business in Scotland, said independence needn’t be a problem for the business: “As a wine importer we’re used to dealing with foreign countries. If we moved into the euro zone, that would actually make life a lot simpler.”

However, he does see a potential threat for smaller retailers from a less obvious source. “The biggest threat for independent retailers could be a separate Scottish head office for the major multiples,” he said, “which could then become much more responsive to the specifics of the Scottish market.”

He’s also concerned an independent Scotland might be seen as a “backwater” by the generic bodies. “I fear we would be under threat of losing the support of the London-based bodies for some of their activity,” he said.

John Lee of the Scottish Grocers’ Federation, which also remains politically neutral on the issue, believes we should prepare for a long period of political negotiation. “The independence referendum is one milestone

in the calendar – we also have a UK election in 2015, and the potential date for independence itself in 2016.”

Whichever way the vote goes, it may only be the beginning of a long debate over Scotland’s position and, even without independence, the landscape for drinks retailing is likely to be subject to extended discussion.

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