A still and warehouses at Royal Brackla Distillery in Scotland. Photo ©2014 by Mark GillespieJanuary 29, 2015 – A new report released Wednesday by the Scotch Whisky Association estimates the whisky industry’s economic impact on the UK at £5 billion ($7.52 billion USD) annually, with the impact being felt not only in Scotland, but in England, Wales, and Northern Ireland. The study was done by the research firm 4-Consulting, and puts the direct impact at £3.3 billion, with secondary impacts such as packaging, logistics, and tourism accounting for around £1.7 billion.

“I think anybody who visits Scotland and visits the Scotch Whisky industry understands just what place it has in terms of Scottish society and the Scottish economy,” said the SWA’s David Williamson. “You don’t have to go very far on Islay or in Speyside to see the evidence of that positive impact.” The study puts total industry employment at 40,300 jobs, with 10,900 of those jobs directly within whisky-related businesses and the remainder employed indirectly through agriculture, logistics, manufacturing, and related industries. As a result, each whisky industry job supports 2.7 additional jobs in the UK economy.

Listen to Mark Gillespie’s entire interview with David Williamson:

Additional impact comes from the location of many distilleries in rural areas, with around 20% of the whisky industry’s work force located outside major cities and providing an estimated £250 million of income to rural communities. The study places Scotch Whisky as Scotland’s third-largest industry, trailing only energy and financial services, with whisky accounting for 70% of the Scottish food and drink sector. The findings are based on data from the UK’s Office of National Statistics and the SWA.

While 2014 export data will not be available until this spring, data from 2013 shows Scotch Whisky generates 1.4% of all UK exports but has a larger impact on the UK’s trade balance. Since almost all of the industry’s raw materials come from within the UK (except for imported casks, barley, and some capital equipment), 2013’s £4 billion in Scotch Whisky exports made it a larger contributor to UK exports than the aviation, pharmaceutical, auto, steel, and all other industries except for mechanical equipment. The report estimates the UK’s trade deficit for 2013 would have been 16% higher without the impact of Scotch Whisky exports.

The report’s release comes as the SWA and other spirits industry groups are pushing for a cut in taxes on whisky and other spirits. Chancellor of the Exchequer George Osborne is scheduled to release the coalition government’s next budget on March 18, and the industry wants more than just a second straight year of freezes on excise taxes and duties. The goal is a 2% cut in taxes on whisky sold within the UK, where taxes currently make up 78% of the average price of a bottle of whisky.

The SWA’s Williamson cites economic studies showing that the 2% cut would generate an additional £1.5 billion each year in economic impact across the UK, but admits that the odds of getting a cut are long. “If you’re paying four pounds of every five in tax to your Finance Minister, you can see that that is going to have an impact on your ability to compete,” he said.

The entire SWA report is available to download.

Links: Scotch Whisky Association