Scotland independence could mean bad news for Scotch drinkers

The future of Scotch whisky remains uncertain in the wake of vote for national independence.

The future of Scotch whisky remains uncertain in the wake of vote for national independence.  (Macallan)

Scotch drinkers might want a stiff shot if Scots vote to secede from the United Kingdom Thursday.

The vote will have major implications for Scotland -- and its most beloved export: Scotch whisky (spelled without an e in Great Britain.)

Scotch is big business in Scotland and highly regulated.  By definition, it can only come from oak casks that have matured for at least three years in Scotland.  There are only 109 distillery that are licensed to produce Scotch. Last year, Scottish whisky was a $6.9 billion dollar export business -- making up 85 percent of the country’s total food and drink exports and 25 percent of the U.K.’s edible exports, according The Telegraph

Most of the country's top Scotch producers have declined to comment on the referendum, instead referring to the Scotch Whisky Association  trade group. In an open letter, its chief executive David Frost outlined why it favors the status quo.

“Our success is not the result of chance. It has come about because of a wide range of factors which have been well provided for us within the U.K. and would need to be similarly provided in the future if it were to be within an independent Scotland.”

Here are five ways Scottish secession may affect Scotch and hurt this booming spirit business.

1. Less E.U. support: If Scots vote yes to independence, there's no guarantee that an independent Scotland would be welcome in the EU, and if it was, it's unlikely the Scotch industry would get similar benefits it has under the U.K.  Currently, Scotland enjoys farming subsidies and export tariff protection. According to The Guardian, EU officials are concerned about the polarizing effect support for a newly seceded Scotland may have on British relations. Without backing from the EU, the Scotch industry may face difficulties negotiating international trade deals, and may be subject to increased liquor tariffs on exports.

2. More imitators: The Scotch industry has relied on the U.K.-based Trade and Investment (UKTI) to help protect against Scotch imitators. If Scotland secedes, it plans to open up to 70 to 90 embassies around the world, but that is less than half of the diplomatic postings the U.K. has, and protection in the 200 or so markets it exports to. 

3. Pricier spirit? If its voters chose to secede, it's likely Scotland would no longer use Britain's pound sterling currency.  A new currency would be seen as less stable and according to the Scotch Whisky Association that would make Scotch hard to price. This would also make "Scotch industry’s exports, supply chains, pricing and competitiveness vulnerable."

4. Scotch shortage: Under the EU Common Agricultural Policy, Scottish farmers currently get subsidies to grow barley.  Without EU support, it's uncertain whether Scottish farmers will be able to produce sufficient amounts of barley.  Some speculate that this could even create a scotch shortage. 

5. Higher taxes: Legally, scotch must be made in Scotland, so independence may boost the industry's status inside the country. But The Telegraph points out that the burden of being Scotland's greatest export may leave the Scotch industry susceptible to government manipulation through higher taxes on the product.