This is the one

WITHIN A week Scotland will have decided whether to stay with the UK or go it alone. But what does this all mean for the food and drink sector, north and south of the border?

Foodservice Footprint FPT2014054-300x199 This is the one Features Features  Scottish Independence Richard Lochead Morrisons Ivan Menezes ASDA Alex Salmond










This month Scotland will vote on whether to remain a part of the UK or go it alone. As Footprint went to press, Alex Salmond and Alistair Darling, respectively the leader of the Scottish National Party and the head of the Better Together campaign, were gearing up for the second live TV debate. Some 700,000 postal voters will have just started to receive their forms. Ice bucket challenges aside, it’s just got serious.


So what does this “once in a lifetime” decision mean for those in the Scottish food and drink sector?


The Scottish government has just published “Scotland’s Future: Food and Drink”. The report details how independence will “open new doors and access to new markets for our produce”, said the rural affairs secretary, Richard Lochhead. “It will also ensure that food and drink companies benefit from the strong provenance of their produce.”


That the paper ran to just six pages might come as surprise. This was short and sweet in a campaign that has been anything but. Let’s not forget, too, that this is a sector that generated a turnover of £13.9 billion in 2012.


Between 2007 and 2013 there has also been a 51% increase in exports and a 32% growth in sales within British retail.


Growth targets were hit six years early and food and drink is now second only to oil when it comes to national assets. Few opportunities have been missed to tout the figures, and how they compare with those south of the border. “I don’t want to rub it in,” boasted Salmond at a conference in September 2012, “but it’s worth noting that growth of food exports from our country have outperformed that of England, Northern Ireland and Ireland.”



The Yes campaign claims the gap would be wider still in an independent Scotland. International trade deals, for instance, are negotiated by the EU on behalf of member states with the UK government negotiating in “Scotland’s best interests”. However, as the recently published report highlights, food and drink exports represent 18% of all Scotland’s exports, but only 1.5% of those from the UK as a whole. “Governments in Westminster often do not prioritise this sector despite its economic importance in Scotland,” the report reads.



A case in point is beef. The Republic of Ireland already has an agreement in place with Japan; negotiations for a similar deal with the UK have been slow.


The importance of emerging markets for the UK food and drink sector cannot be overstated. The amount British consumers spent on food fell by 1.3% in July – the first drop since records began in 1989. PricewaterhouseCoopers has long warned that a reliance on “low growth” domestic markets and the eurozone is a risky tactic for food businesses. The most successful firms will be those that develop a business strategy focused on exploiting markets such as Japan, China and India, the accountants have claimed.


The coalition argues, however, that the UK has the clout to deliver lucrative food export deals. In response to the Scottish government’s report, a spokesman explained: “We have beef export agreements with 47 countries worth £20m, opening the Scottish meat market to millions of consumers. In an independent Scotland, producers could continue to compete and sell goods as exports to the rest of the UK – but there is a difference between exporting and selling to domestic customers and retailers.”


Morrisons and Asda have warned that food prices could rise in Scotland in the event of a Yes vote. The government spokesman was keen to highlight that, as part of the UK, Scotland has “unimpeded access to a domestic market of over 60m customers. There are no regulatory carriers when selling produce anywhere in these islands and we all use and trade in the same currency.”



Coins are often used in 50-50 decisions, but never has the type used been so critical. Whether Scotland could retain sterling was a focal issue in the first TV debate.



It clearly concerns food and drink businesses. Brad MacKay, from the University of Edinburgh business school, has been carrying out extensive interviews with business leaders across six strategically significant growth industries.



Of the 10 food and drink business leaders questioned, nine identified uncertainty over the currency and taxation system in Scotland as being “the most significant uncertainty for the future of their business operations”.



In capital-intensive industries such as whisky, where it can be 10 years before the product is mature enough to sell, there was concern about the borrowing costs if, as a small independent country, Scotland pays a premium for borrowing on international markets.



A much larger survey of 759 businesses by Stirling University echoed these findings, with currency a concern for all types of firm, especially those that mainly trade with the rest of the UK – 70% regard it as an “extremely important” issue.


Whisky has been the darling of the Scottish food and drink sector: it’s worth £4 billion and 40 bottles are exported every second. Diageo, which controls 40% of the country’s whisky production, has expressed its concerns relating to conflicts in currency and tax regimes in the event of a Yes vote.



But its CEO, Ivan Menezes, told the Wall Street Journal in May that the decision was for the people of Scotland to make, adding: “What we will fight for is keeping our industry competitive and thriving”.



That’s also important for those producers south of the border.



Of course, others see opportunities that come with independence, such as the redesign of regulation, possible falls in corporation tax and greater government support (see box). Andrew Fairlie, a two- Michelin-star chef at Gleneagles hotel, believes the Scottish government has done a lot to support and promote the food and drink sector. “I am certain that with independence the industry will be in safe hands and continue to get the backing it richly deserves,” he said recently.



The latest “poll of polls” showed that 57% of those who have decided want to stay in the union, compared to 43% who will opt for independence. That’s a sizeable gap but there are still undecided voters to woo.



One food executive quipped last year that when it came to the detail of independence versus retaining the union, people were being “treated like mushrooms – kept in the dark and fed bullshit”. With less than three weeks to go until the vote, there is some light at the end of the tunnel.