What Scottish Independence could Mean for the Price of your Single Malt

June 13, 2014

Bad news: The price of scotch could be going up, and it all depends on the results of a September referendum. On the 18th of that month, Scots will go to the polls to decide if they will remain part of the United Kingdom or tell London that no, we’re going to give this independence thing a shot, thank you very much.

If they choose the latter course, according to recent speculation, the scotch industry could face a bit of turbulence. Among the effects? Price volatility of your favorite single malt.

And you thought it wouldn’t affect you. Scotland has a population the size of Minnesota’s, and its GDP is one-tenth of the U.K.’s, which is in turn 3% of the world’s. So what if they want to set out and chart their own path? We did, too, way back when, and that turned out pretty well.

Alas, the world is a more interconnected one than it was in the 18th century, which means when the country that perfected the art of whisky making does a cannonball into the pool of global geopolitics by declaring independence, the ripples make their way to all of us. (For those who insist on adding an utterly unnecessary “e” into the word whisky and disagree with my characterization of scotch as the pinnacle of the art, the comments section is open.)

I’m not an economist, so I won’t pretend to be by employing paragraphs of overly technical language to explain the ins and outs of how this affects scotch pricing. In short, it’s a function of the uncertainty around the future of Scotland’s currency. That uncertainty translates into exchange rate volatility. Distilleries, like all companies that compete globally, engage in currency hedging, which allows for a measure of pricing stability. And unpredictable currency exchange fluctuations introduce challenges to those hedging strategies. The result is more difficult decisions surrounding export planning and pricing, which means producers might need to increase prices to protect themselves.

To be sure, the coming referendum has produced no shortage of apocalyptic predictions. It’s difficult to separate actual, realistic scenarios from political fear mongering. But if Scotland votes for independence, those among us who appreciate a healthy pour of our favorite whisky might see a rise in prices. Although, let’s be honest, the size of such an increase isn’t likely to be substantial enough to dissuade us from partaking.

In any event, it’s Friday, and it doesn’t seem right to end this week’s Molotov Cocktail offerings on a low note. So we’ll also add this introduction to whiskies from some surprising places of origin around the world.

Bottoms up!

 

John Amble is the Managing Editor of War on the Rocks.

 

Photo credit: Martin Leveneur