Spanish producers warned of problems ahead as Brexit looms
Spanish wine producers have been warned of the uncertainty that will prevail when the UK leaves the EU on March 29th, and the importance of preparing for the event.
The Spanish Wine Federation (FEV) has cautioned the country’s wine makers that they could face increased taxes on their exports to the UK after Brexit which is scheduled to take place on March 29th. The news has created more uncertainty in the sector, which is still in the dark about the rate of tax increases. However, there is growing resentment on the unfair and discriminatory nature of the taxes which will only impact on wine, but not beer, spirits or cider.
The UK is the fourth largest market for Spanish wine, but the first in bottled wine, both in volume and value terms, with over 106 million litres being shipped in 2017, worth 251 million Euros according to customs data. This is a drop of 5.8% in volume and 4.6% in value compared to the previous year.
But the decline is even worse than the headline figures suggest. Sales of Spanish packaged wine to the UK dropped by 12.7% to 78.9 million litres between January and October 2018 compared to the same period a year previously, and were down by 7.7% in value to 194.4 million Euros. Some of this decline, according to the FEV’s general director José Luis Benítez is as a direct result of the uncertainty created by Brexit, as well as the poor harvest in 2017“Many factors come together, and Brexit is certainly an influence,” he said.
The director of the wine division of Zamora, which includes brands such as Mar de Frades and Ramón Bilbao said that his company had done some analysis into the impact of Brexit, and found that “the price increase for the consumer was just over half a pound, but we will specify it when the rates are known.” One of the most worrying aspects of Brexit, he added, is the rise in rates along with the devaluation of the pound against the Euro.
“There will be a decline in the consumers’ puchasing power,” he said. “I do not think the English consumer will turn his back on Spanish wine, and much less on Rioja, but if he has less money in his pocket, instead of spending ten pounds he will spend eight.”
Meanwhile, the Spanish Wine Federation has been preparing itself and its members as best they can for for Brexit and have distributed a guide concerning the main issues, namely, treasury, movement of goods and services, customs and tax movements and movements of products and employees.
“You have to be prepared but it is difficult beause everything could change,” said Benítez. “If Brexit occurs without a transitory period it will be necessary to see wha happens if the merchandise can be blocked in the ports, if there will be truck jams and customs procedures.”
FEV also pointed out that even without the chaos of Brexit to take into consideration, up to 15% of Spanish wine producers maintain a high risk of default, accoring to a report by insurers Crédito y Caución highlighting the narrow margins that so many wine businesses operate within. The average turnover of Spain’s 4,000 wineries barely reaches three million Euros, with a profit of 180 Euros.