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November 2009
Business jungle
Brand of outsiders
Scotland's image has taken a pounding but the proud country's businesses are fighting back. Lucy Fitzgeorge-Parker reports
It’s been a bad 12 months for Brand Scotland. First came the downfall of its homegrown flagship financial institutions, HBOS and RBS, striking a heavy blow to Edinburgh’s credibility as a banking centre. Then in August, Justice Secretary Kenneth MacAskill sparked an international uproar when he authorised the early release of convicted Lockerbie bomber Abdelbaset Ali al-Megrahi. Outraged, Americans threatened a boycott of Scottish goods and called on their countrymen to cancel trips to the UK’s northernmost nation.
For Scottish tourism — an industry that supports nearly 10% of local jobs — such a boycott would be very bad news. Overseas travellers are a tidy earner for the region, bringing in more than €1bn a year, and high-spending Americans are easily the most valuable. Last year, 340,000 made the trip, accounting for 14% of Scotland’s foreign visitors by numbers and 21% by spend, with US travellers contributing £260m (€290m).
Scotland’s golfing centres are particularly at risk if US visitors stay away. Golfers are the most profitable tourists, spending twice as much on average as other visitors, and nearly 20% of revenue from American travellers is golf-related. Most vulnerable are regions such as Fife, home to the historic courses of St Andrews, where US income accounted for 47% of the total £85m (€95m) tourist take in 2008, and big-name golf resorts including Gleneagles in Perthshire and Turnberry on the west coast.
Also likely to be affected would be the luxury sector in Edinburgh, where American visitors spent a total of £83m (€92m) last year. US groups Starwood and Hilton both have five-star properties in the city; neither company would comment on the boycott, but with high-end occupancy rates already under pressure and American consumer spending showing scant signs of recovery it clearly couldn’t have come at a worse time.
Whether American visitors will really stay away remains to be seen. At the start of September, US carrier Continental Airlines said load factors on its flights from New York to Glasgow and Edinburgh were holding steady at around 87%, and tourist coordinator Visit Scotland insisted scheduled tours were still departing the US as planned. Winter is Scotland’s downtime, so visitor numbers are already declining; local operators will be hoping that the boycott is forgotten before the start of the next summer season.
For Scottish exporters, it’s an entirely different story. The US is Scotland’s biggest export market, accounting for 13% of total overseas revenue (excluding oil and gas) of £20.6bn in 2007, and Christmas sales are key for consumer products such as whisky, shortbread and Harris tweed. Yet manufacturers seem undaunted by the prospect of a boycott from their biggest overseas market, possibly because they don’t believe in it.
“We’ve had absolutely no contact from anyone in the States — in fact when we mentioned this to our US agents they said they’d never heard of it,” says Ian Angus Mackenzie, chief executive of Harris Tweed Hebrides. “As far as we’re concerned this is a non-event.”
Mackenzie is furious at media reports that the firm, which makes more than 90% of all Harris Tweed and was voted Scottish Textile Brand of the Year for 2009, had decided to drop the Scottishness from its marketing for New York Fashion Week in response to pressure from the US. “At no time did we ever think or talk about it,” he says. “Harris Tweed is a Scottish icon and we proudly proclaim our Scottishness.”
Other Scottish companies such as Walkers Shortbread — famous for its distinctive tartan biscuit tins — were reluctant to comment but indicated that press reports of concerns over Scottish branding were misleading.
Scotch whisky manufacturers are similarly unperturbed. The industry has the most to lose from an American consumer boycott — the US is its largest overseas market, accounting for 12% of global exports of £3.1bn last year — but so far the only impact has been a flurry of internet activity in the immediate aftermath of Al-Megrahi’s release.
“It’s business as usual in the US at the moment,” says a spokesman for the Scotch Whisky Association (SWA), which represents 55 of the leading producers. “Like many Scottish organisations and media we received emails from the US about the judgement, but our members aren’t reporting anything more serious than that.”
The industry has every reason to be confident. Scotch whisky has proved recession-resilient, if not recession-proof, registering record sales in 2008 at a time when many of its key markets, including the US, were badly hit. Sales for the first quarter of this year were slightly softer but figures for the second quarter were expected to show a healthy recovery.
All eyes are now on the crucial Christmas period, when 40% of malt whisky and 30% of blended whisky is sold. A knock-on effect from the US during this time would clearly be unwelcome, but the industry is confident that any adverse reaction is unlikely. “We’ll keep monitoring it but so far we’re not seeing any cause for concern,” says the SWA’s spokesman.
The Scottish executive is also hoping it’s heard the last of a US boycott, particularly as blame for the Libyan debacle has now spread across the border to the leadership in Westminster. A spokesman for the Scottish government says: “The strong and enduring relationship between Scotland and the US will continue. We are confident that world-renowned quality Scottish products will always find an eager market in the US, as elsewhere.”
If that confidence is misplaced, Scottish employees in industries from textiles to tourism could suffer. Early indications are that the threatened storm has been averted, but, as the chilly northern winter sets in, cautious Scots in the consumer and travel sectors are still likely to be keeping a weather eye on the US.
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