With March 29th edging ever closer, the effects of the UK’s imminent departure from the EU have been felt across every industry.
Much of the focus has been on food and drink, with consumers already stockpiling goods in the event of a no deal departure, and luxury items such as wine are set to be hit particularly hard as well. The UK is the world’s second largest importer of wine behind the US, bringing in around £3.16 billion’s worth during 2017. Roughly 55% of this comes from the EU, and many of the trade deals that facilitate imports into the UK from countries outside the EU are with the union, rather than the UK themselves.
With the uncertainty around what a post-Brexit Britain will look like, the potential no-deal scenario has unsurprisingly caused panic in some quarters. In this piece, we’ll delve into how exactly Brexit is impacting the fine wine industry, as well as what its future may look like beyond March 29th.
Prices have risen sharply as sales plunge
Perhaps the most noticeable impact of Brexit on the wine industry is the rising prices of bottles imported into the UK. The latest statistics show that the price of a bottle of wine has risen by almost 30p since the UK voted to leave the EU in June 2016, a figure which doesn’t even take into account the 3.1% (7p) inflationary rise in wine duty introduced in 2018’s Autumn Budget.
Although wine prices were stable in the run up to Brexit, the aftermath saw the pound’s value plummet, pushing up the price of imports significantly. Worryingly, the volume of sales has also dropped in the same time, with a huge 17% decline in sales between 2015 and September 2018.
The signs for the future do not look good either. Whilst there are currently no tariffs on wine imported from the EU—or countries like South Africa and Chile—this would likely change if the UK leaves without a deal, which would cost UK wine importers more than £100 million a year. These figures come from The Wine and Spirit Trade Association, who have implored the government to temporarily suspend wine tariffs in this scenario, otherwise, they fear prices will skyrocket to an all-time high.
Experts like Philip Staveley, head of research at Amphora Portfolio Management, have played down the trouble Brexit may cause wine investors as a result of the sheer scale of the industry. Speaking to The Drinks Business, he pointed to the rising interest in Burgundy, despite fluctuating prices since the referendum result, saying: “What the Brexit referendum does remind us is how flexible an investment fine wine is.”
Wineries are bottling early and retailers are stockpiling supplies
Wine producers and retailers alike are taking precautionary measures should a no-deal Brexit come to pass. They are concerned about both the UK leaving the EU’s electronic excise movement and control system, which the UK government have confirmed will happen in the event of no-deal Brexit. This is the online system for moving alcohol through Europe, and helps to ensure a seamless process with minimal border checks. However, without this system in place, businesses would be forced to rely on pen and paper until a new system is formulated, causing severe delays in getting stock from EU countries into the UK. What’s more, without investing in costly refrigerated trucks, quality wine cannot be left out in the heat during the warmer months. Consequently, those who will be affected are moving quickly in order to avoid the logistical nightmare that could soon unfold.
Take Bordeaux wine producer Gavin Quinney, who bottled his produce six weeks earlier than usual to make sure he got six months’ worth into the UK before March. Speaking to The Guardian, he said: “We know that no deal will mean logjams…[so] we have no option but to shift what stock we can now.” Wine retailers are also taking action—British wine merchants Majestic Wine announced in November that they were stockpiling up to 1.5m bottles “in order to mitigate any potential supply chain Brexit disruption in March 2019”, whilst Bibendum PLB were reported to be considering doing the same.
The UK is signing crucial new trade deals outside the EU
Moves have been made by governments from around the world to try and reduce any potential fallout from a no-deal Brexit. Both the US and Chile have signed trade continuity deals with the UK to ensure there is no disruption to wine trade after March 29th. These two nations only have trading deals with the EU currently, so Brexit would have left them without agreements with the UK. However, the deals signed by the US and Chile with the UK mimic the ones they have with the EU.
The UK is the fourth largest market for US wine exports, and around 9% of UK still wine sales in 2018 were Chilean bottles, so it was imperative that these trade relationships were maintained. According to the Wine and Spirit Trade Association, the Chilean deal is expected to save the wine industry an estimated £9.2m in tariff costs
While the fallout from Brexit has hit the wine industry hard, measures are being taken to reduce the potential damage that could be caused. The trade deals signed by the US and Chile signal a willingness to continue as normal, and the signs are that investors may also be unaffected. Let’s hope that the wine industry doesn’t face too much of a hangover once the UK leaves the EU.