Full impact of Ukraine war 'uncertain' for Highland businesses
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Highland businesses will inevitably lose business and face additional financial pressure as a result of the conflict in Ukraine.
However, it will be difficult to assess just how much of an impact it will have on the north economy.
A spokesman for development agency Highlands and Islands Enterprise said: “Sadly the region’s economy will be affected, directly and indirectly, by the situation in Ukraine.
“There are businesses in the region who will have been importing from or exporting to Russia and/or Ukraine. Most will also be affected by increased energy costs.
“It is still impossible to quantify the full extent of these impacts, but we are working with our clients, partners and the Scottish Government to get a clearer picture and to determine the most effective response to the impacts.”
One sector likely to be affected is the whisky industry.
The Russian market is worth around £28 million to the Scotch whisky industry, which sells around 42 million bottles to the country each year.
Ukraine is a much smaller market, but is still worth £3.3 million to the whisky industry, which exports around 1.8 million bottles annually.
Around 2000 people in Russia and Ukraine are understood to be directly employed by the industry.
A spokesman for the Scotch Whisky Association said: “Our thoughts are with all those affected and displaced by the conflict. The welfare of industry employees working in Ukraine and Russia is paramount. We continue to closely monitor the situation and pass on any relevant government guidance on exports to our members.”
However, one of Scotland’s other export success stories, salmon, is less likely to be impacted as salmon exports ceased with the imposition of sanctions after the annexation of Crimea in 2014.
There may be a mild knock-on effect from other producers such as Norway looking for alternative markets as a result of their sanctions on Russia.
In contrast, a spokesman for the Scottish Pelagic Processors Association said that Ukraine was an important market for the Scottish fishing fleet, but with the main processing plants in Lerwick and Peterhead, the disruption of trade is likely to have a bigger impact on Shetland and Aberdeenshire than the Highlands.
In the renewables sector, Crown Estate Scotland (CES) has called on the 17 winners of the 25GW ScotWind offshore leasing round to provide written assurance they are complying with sanctions.
Although initial checks showed that none of the successful consortia are Russian-owned or registered, CES wants further assurance and warns “appropriate action” will be taken if this is not received.
Inverness economist Tony Mackay said that with Scottish exports to Russia standing at
£245 million in 2019, it could reasonably be assumed that Highland exports would be equivalent to around a 10th of that.
However, he also pointed out that exports to Russia were markedly low in comparison with Scotland’s biggest overseas market, the USA, which is worth £6 billion, and major European trading partners France, Germany and the Netherlands, which are all worth in excess of £2 billion to the Scottish economy.
“I don’t think that bans on UK exports will have a noticeable negative impact,” he added.
“The whisky industry is currently booming so I expect the distillers to easily find other export markets.
“The main negative impact will come from the huge increases in gas and other energy prices, which will drive up the costs for most businesses in the Highlands.
“That will reduce their profitability and possibly their output.”
