Why the UK's wine and spirit industry is stronger in the EU

Why the UK's wine and spirit industry is stronger in the EU

by Miles Beale 03 June 2016

Miles Beale, chief executive of the Wine and Spirit Trade Association, tells us why two of the UK's most important drinks industries are better off if the public votes to remain in the EU in this month's referendum.

Miles is the chief executive of the Wine and Spirit Trade Association and was previously a senior civil servant at Whitehall.

Miles is the chief executive of the Wine and Spirit Trade Association and was previously a senior civil servant at Whitehall.

Forty-one years ago almost to the day, on 5 June 1975, the UK held its first (ever) nationwide referendum on the country's continued membership of the European Communities (or Common Market), which it had entered in 1973. The result of a general election pledge, it was a Labour government – with a split Cabinet – offering a referendum on membership agreed by a Conservative one.

After a bruising campaign so far it feels almost as long since the Prime Minister announced the date of the UK’s referendum on whether to stay in the EU back in February. But 23 June is now only days away. There has been a palpable sense that the Remain and Leave campaigns are raising the intensity of the debate – the temperature of the rhetoric has increased, the volume has been turned up to eleven and the tone has become ever more acrimonious. And with more rivalries, schisms and unlikely alliances than a Shakespearean drama, it is all too easy to lose sight of the magnitude of the referendum which has (rightly) been described as the most important political event in the last forty years. Or forty-one years to be precise.

Like many other voters, I know that those working in the food and drink sector crave more information and less rhetoric. An opinion, not an argument; a view, not a sermon. So, what is the position of the UK’s wine and spirit industry? While we do not speak for everyone in the trade, Wine and Spirit Trade Association (WSTA) members are overwhelmingly in favour of remaining in the EU. The WSTA represents over 300 UK businesses throughout the supply chain, from producers through to retailers. And ninety percent of members that responded to our survey want the UK to remain in the EU.

Gin is a hugely important industry in the UK, as is whisky for Scotland – two sectors that would lose out if the UK left the EU
It's not just the spirits industry that would be worse off – as one of the world's biggest wine importers, certain trade benefits could be lost

The Single Market

With small and medium-sized enterprises (SMEs) making up some seventy percent of WSTA membership, one of the key benefits of remaining in the EU highlighted in responses was the unfettered access to the Single Market of 500 million consumers – where a third of UK wine and spirits exports go.

The question of how to maintain full access to the Single Market if the UK votes to leave is particularly thorny. It is not impossible to achieve. Norway and Iceland have secured access through their membership of the European Economic Area (EEA), but this comes at a price. They are required to observe all of the EU’s Single Market regulations – without having a say in what they are – and also to make payments into the EU budget. In Norway’s case, this amounts to around ninety percent of Britain’s net payment on a per capita basis. Switzerland, which is not in the EEA, has negotiated bilateral agreements that give access to goods but still has to keep to most Single Market rules, contribute to the EU budget and accept free movement of people. The Swiss have been warned that, if they try to implement a 2014 referendum demand for limits on the latter, their trade agreement with the EU will lapse.

So it is not surprising that WSTA members’ concerns about leaving the EU included a more uncertain trading environment, loss of access to the Single Market and the absence of a UK voice at the table to shape EU regulations by which our industry is – and would continue to be – bound. And those EU regulations, so often the scorn of Brexiteers, play a crucial role in promoting and protecting UK businesses, their (high quality) products and consumers. It is a widely unfashionable argument to run, but EU regulation is good.

Those EU regulations, so often the scorn of Brexiteers, play a crucial role in promoting and protecting UK businesses, their (high quality) products and consumers. It is a widely unfashionable argument to run, but EU regulation is good.

Miles Beale

Without the EU regulations which British gin producers must adhere to, they could soon be undermined by cheaper, inferior products
Wine bottles
Custom controls and trading barriers could soon spring up after a vote to leave the EU, making importing (and exporting our own) wines much more difficult – and costly

In support of gin

Take gin for example. As much as we like to moan about suffocating red tape from Brussels, British gin is a significant beneficiary of rules laid down in EU regulation, which cover what can and cannot be done when making gin. These EU spirit rules make it worthwhile for our gin producers to invest in producing high quality, premium products safe in the knowledge that they cannot be undermined by products which fail to meet the definitions. So, as delicious and refreshing as a Malawian gin and tonic is as a 'sun-downer' in southern Africa, it cannot be marketed as gin in the EU because the predominant flavour is orange – not juniper.

In addition, the EU definitions of gin, distilled gin and London Dry Gin reflects gin’s distilling history – and codifies it. As such it does us all a favour. But it is also retrospective and so distinctly British in flavour or, in other words, it has an inherent British bias. But those definitions are also relatively simple and unrestrictive – at least 37.5% ABV and predominantly juniper flavoured with progressive changes between each definition, which allows for (and perhaps encourages) innovation and product diversity. So, for British gin, the European framework rules, the Single Market and good old British entrepreneurship have led to the explosion of new and exciting British gins on the (Single) market, responding to and stimulating consumer demand.

But it was not just disruption to trade within the EU that WSTA members were fearful about should the UK decide to leave. They also expressed concerns over losing the benefit of the EU’s free trade agreements with non-member countries, affecting the status of the UK as the world’s gateway to the EU – which it unquestionably is for the international drinks industry.

A taste for wine

The UK is at the very heart of the world wine trade. We are the world’s second largest importer of wine by volume, after Germany, and second by value behind the United States. Not a lot of people (or politicians) know this. Per adult, the UK is the world’s leading major importer by both volume and value and accounts for thirteen percent of all global wine imports – that’s the equivalent of the UK importing one bottle in eight of all world wine imports. Nearly half of the wine coming into the UK is imported from outside the EU, and four of the top five non-member countries that export to the UK benefit from EU trade agreements. The benefits of these – reduced or tariff-free access, mutual recognition of winemaking practices and flexibility on labelling – would be lost if we were to leave, with no guarantee that similar agreements could be signed at some point in the future. This, combined with the possible reintroduction of costly customs controls and trading barriers, could make the UK a less attractive place to invest. Short term uncertainty and concerns about some or all of these outcomes would certainly weigh on investment decisions. As such, trade flows would be threatened and, in turn, so would UK jobs.

So remaining in the EU matters to WSTA members and to the UK’s wine and spirit industry. And our industry matters to the UK. Through distilleries, vineyards, bottling plants, logistics companies, wholesalers, distributers and retailers it supports nearly 600,000 jobs in the UK, contributes £45 billion in economic activity and pays over £15.5 billion in tax every year. Moreover, wine and spirits are part of the hugely successful UK food and drink industry, now the UK’s biggest exporting sector. And we are also part of a hospitality sector that boasts London as the most visited city in the world and over four million jobs – half of which are occupied by those under thirty. So our views – both as industries and individuals – matter. And so does our success. For wine and spirits the view is clear: we are better be able to invest, grow and create jobs if the UK remains in the EU.

The WSTA survey revealed

• 90% of respondents supported the WSTA’s stance of supporting the UK’s continued membership of the EU. Two percent were in favour of leaving and the remainder were undecided or impartial.

• 91% believe EU membership had a positive impact on the wine and spirit industry, 85% think the EU had a positive impact on their business and 69% a positive impact on consumers. Just nine percent believed it had a detrimental impact on the industry, six percent on their business and six percent on consumers.

• Among the most common concerns about leaving were: 81% felt it would create an uncertain trading environment, 81% were worried about complying with EU regulations without shaping them, 81% cited customs duties and the impact on third country goods and 78% are concerned about restricted access to the common market.

For more information on the WSTA visit their website, or click here to see what the association said about the EU and exports when invited to talk to the Prime Minister.