Diageo is ‘very forcefully’ pushing UK government for best Brexit deal

Diageo, as the largest company in the Scotch whisky industry, is “very forcefully” impressing on the UK government the need for the best possible Brexit deal, Ivan Menezes, the chief executive says.

“Spirits are Britain’s biggest export”, he claimed earlier today and said that Diageo is identifying opportunities to expand the global market once Britain leaves the EU.

The “no deal” scenario with the EU would have little material impact on Diageo’s sales to the remaining countries because the fall back position would be trading under World Trading Organisation rules with zero tariffs on spirits.

However, he warned that there could be a negative cost effect on British producer companies if there was an increase in the volume and complexity of documentation to meet customs formalities on products crossing EU borders or between the Irish Republic and Northern Ireland.

“We don’t want any delays to lorries with our products crossing borders,” he said. Europe, largely the 27 EU countries, accounts for more than 20% of Diageo’s global sales. “We want unfettered trade, ” he said.

Mr Menezes said that there were encouraging signs in the negotiations so far with Brussels and that Diageo is providing considerable background input for Whitehall’s negotiators.

He also said that he foresaw long-term benefits with third countries, especially India, once Brexit has taken place and Britain is free to forge its own bi-lateral trade deals.

Diageo sources also pointed to the prospect of greatly increased duty free business between Britain and the EU’s 27 members post Brexit, boosting both the volume and value of the sector. In turn, that could lead to renewed public pressure for lower UK duty rates once British consumers appreciate the high levels to which spirits are subject.

Overall, Mr Menezes said he was encouraged that the world economy was growing and that Diageo “has increased investment behind our brands and expanded organic operating margin through our sustained focus on driving efficiency and effectiveness throughout the business”.

That made him confident that Diageo “would continue to consistent mid-single digit top line growth and 175 basis points of organic margin” in the three years to June 2019.