Diageo warns of the dangers of any UK departure from the EU

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Diageo has fired a warning shot against any possible British departure from the European Union and the risks it would have on not only its business but the future of key markets such as the Scottish whisky industry. This could be exacerbated further if if Scotland chooses to become independent later in the year.

Diageo, which has its largest production centre in the UK and is Scotland’s biggest exporter of manufactured goods, said much of Scoth whisky’s recent success was down to EU held trade deals.

Scotch whisky barrels

Scotch whisky barrels

Scotch whisky barrels

As part of the EU, goods produced in Britain benefit from the EU’s 31 international trade agreements, which most recently added Columbia and South Korea and is currently in negotiations with the United States.

The EU and the United States began talks last June, which once completed will be the biggest bilateral trade deal ever negotiated. A deal that the UK would have to re-negoiate if it was not in the EU. The agreement could add 0.5% to the EU’s economic output. Total US investments in the EU are three times higher than in all of Asia. The EU and US economies combined make up half of the entire world’s GDP and a third of the world’s trade flows.  

Britain has an opportunity to withdraw from the EU after a proposed referendum in 2017, however, it would then need to renegotiate all of current trade deals individually and without the bargaining power of the EU behind it.

Ivan Menezes, the chief executive of Diageo said: “We benefit from and support the UK being in the EU.”

Scotch whisky represents about 30% of Diageo’s sales and operating profits. However, despite the success Scotch has taken a hit in recent months as China began a campaign to cut excessive gifting, which has had a negative impact on sales in the country.

Diageo put Whyte & Mackay, one of Diageo’s Scotch whisky arms, up for sale this week in an effort to appease competition authorities.The spirits and wine giant purchased United Spirits last year and in order for the sale to move forward Diageo offered to sell Whyte & Mackay business.

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