UK wine trade will be hit hard by Brexit, with prices soaring by 22% claim economists
The UK wine industry will be hard hit by Brexit, with wine prices soaring by 22% by 2025, the value of UK imports dropping by 27%, while consumption levels will have plummeted by 28%.
This is according to two Australian economists, Kym Anderson and Glyn Wittwer, who have produced a model indicating that this will be the outcome as a result of slower economic growth, and unfavourable exchange rates, which will increase the cost and cut demand for imported wine in bulk and in bottles in the UK.
This is bad news for producers as the UK currently accounts for around a fifth of total wine imports. The economists calculate that there will be a $1.2bn reduction in wine exports from the EU as a result of the diminishing demand.
However, there will be some winners. Sterling’s depreciation in recent months has helped foreign sales by Britains fine wine exporters, (though increasing their own import costs at the same time).
And the English wine production industry itself should also benefit from the rising costs of imported alternatives, though the advantages will be modest, given that English wine currently only accounts for less than 1% of UK consumption, and hardly any is exported.
Anderson and Wittwer also warn that even if the UK were to sign new free trade agreements with the 27 EU countries and others, the time it would take to implement them and for markets to adjust ensures that the likely effect of Brexit on wine markets will be adverse for the next few years.
Miles Beale, the chief executive of the Wine and Spirit Trade Association which opposed Brexit said: “Europe has had the world’s greatest wine producing and trading nations cheek by jowl for years. We risk losing that. “ But he is now concentrating on how to adapt to the new trading conditions.
Proposals include easing the transition with common EU policies and a wider reduction in tariffs and harmonization of standards, and cutting taxes on wine consumption within the UK.
At the London Wine Fair this week, Brexit was the hot topic of discussion. Patrick McGrath, managing director at UK agents Hatch Mansfield said there had been pricing pressure with the fall in sterling, but he was pragmatic about the situation. “Everybody is now working with the new exchange rates,” he said. “The hotel and restaurant market is very strong…. I think it will net off. And the fine wine trade will do very well.”