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Saturday, 11/Oct/2008
Islay and the 'Credit Crunch'
Nobody really knows where, when and how the ‘Credit Crunch’ will end. It therefore is difficult to predict what the impact on a place like Islay will be. Pessimists and doomsayers say the world as we know it will come to an end and we will go back to the stone age (or something along those lines). The optimists think it will only be a blip and we will soon be back to normal. Either way, Islay won't escape any impact completely, so what could it be? I'm not able to provide answers, but would like to start collecting thoughts and ideas.
Some might still think the credit crunch will only impact bankers and the like, after all one well known man on Islay according to a report has lost a third of his fortune (I have no idea if this is true though and if yes what it means for him and/or his estate on Islay). But that would be wrong, it will impact all of us through house prices, pension funds and also a now quite likely a recession.
So which impacts could a recession have on Islay and its industries?
One industry where I can see two ways how the impact could develop is tourism: I think a worldwide recession almost certainly would have an impact on in particular American but also other foreign visitor numbers to Scotland and therefore Islay. On the other hand I can imagine more Brits staying in the UK for their holidays, so there's an opportunity for Islay. Unfortunately its remoteness means Islay is a comparably expensive destination (ferry crossing or flight costs), so a solution for the Road Equivalent Tariff (RET) problem needs to be found.
I'm also in two minds about the famous Islay whisky industry: Against it is the fact that single malt whisky is after all a luxury good, something consumers might reduce their consumption of in cash strapped times. I also see the potential risk of some of the parent companies cancelling or reducing their investments into the distilleries on Islay. On the other hand there are also points speaking for whisky: In the ‘The World in 2009’ blog of The Economist you'll find an entry Soup and Scotch, which quoting an essay about the crisis in the International Herald Tribune tells us to ‘prepare for an age of soup and Scotch.’ If enough people see a good whisky as an essential there might still be good times for it ahead.
A possible area for good news are commodity prices: At least for now oil prices have fallen significantly from their peak just a few months ago, which should hopefully translate into price reductions at the petrol pump as well as for the distilleries. While it won't address the ridiculously high prices compared to the mainland it should still help a bit. There are also voices expecting reductions in food prices, if this also applies to the barley used by the distilleries I don't know.
I'm fairly sure we will all feel the impact on our tax bills for many years to come, the money various governments had to pump into the banking sector (and probably still will) won't give much (if any) options for tax cuts in the forseeable future. As far as I know Argyll & Bute council hasn't got any investment with Icelandic banks so at least from that side there shouldn't be any problems (which is not to say there a no other risks though).
So far for my thoughts at this point with the limited information I have. If you have any thoughts, opinions or helpful links about the crisis (and how it might impact Islay) please share them with me and other readers. That's what the comments are there for...
PS: A good source for background and explanations what it all means I believe to be the BBC's business editor Robert Peston's blog. There's also a lot of excellent information in The Economist (some of it might be only for subscribers, but there's also a lot freely available), among others I found the briefing about Blocked pipes very helpful.
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