Brexit is real!  The majority of Britons have voted to abandon the European Union and a common European political, economic and social framework.  In recent times there has been much talk about this possible outcome and its consequences.  In the night, exit polls initially suggested a win by the pro-EU campaigners, but then the opposite anti-EU verdict materialized, bringing to everyone’s attention the new dramatic European situation and a plethora of uncertainties.  What does this mean for UK vs. EU in terms of wine commerce and consumption, now and in the future? We shall discuss this issue, dealing with current critical points, mainly from the perspective of UK consumers.

The UK wine market… what are we talking about?  Well, the UK is one of the most significant importers of wine in the world, including high value fine wine.  For certain product categories, for instance bubbly wine such as Champagne, it is “The” market.  Britons drink over 354 million litres of EU-produced wine each year, but that amount has dropped in the last few years as consumers have looked to New World wines from places like Argentina, Chile, South Africa, New Zealand and Australia.

Just four days ago Majestic Wine boss Rowan Gormley warned that Brexit would push up the price of wine as the cost of any imported goods will inevitably rise.  Majestic Wine is the largest specialist wine retailer in the UK.  Gormley stated that if Brexit would occur, causing a sustained fall in value of the British pound, then all imported products will have to go up in cost over time and wine will be no exception to that; wine from EU producing countries (priced in Euros) in particular.  He also said this scenario would affect all Majestic’s competitors equally, without upsetting the supply chain, but certainly hampering sales growth.  Gormley made the comments as Majestic announced its first sales progress in four years, one year into a turnaround plan.

There are three main factors that will determine post-Brexit business interaction criteria:

-currency rates (relative value of the British Pound vs. Euro, but also in the long term vs. the US Dollar and possibly vs. other currencies),

-trade tariffs (to be levied upon exchanges between the UK and the European Union),

-trade regulations and standards for products, services, labour, health and more.

It is obvious that the future will bring about great complexity, uncertainty and challenges, probably resulting in higher inefficiencies and higher costs, especially for UK consumers.

Sterling has been weakening against the Euro in the lead-up to the vote and it seems probable that it would continue to fall now that the “Leave” vote won; this would result in price rises across the board as the cost of replacement stock would immediately rise.  There are several UK wine market specialists who rely on the relevance and weight of their market to predict a less pessimistic way forward. But is it pure hope?  Some wine merchants claim it is unlikely that European wine-producing countries would impose additional tariffs, given the significance of the UK market.  Will Hargrove, Chief of Fine Wine at Corney & Barrow, said he had no real short-term fears because things will have to continue.  He also affirmed that in the longer term the UK has the favourable position of being a strong market for almost all European wine producers.  True, one can hope that everyone will desire as little disruption as possible, given the reciprocal importance of trade, but there is absolutely no guarantee of this.  EU bureaucrats have shown in the past relatively little knowledge and care for common viticulture and wine commerce (subsidies to agriculture, then subsidies to wine distillation, then vine-growing quota schemes and constraints, and so on).  Thus, one has the right to be optimistic, but also the responsibility to prepare for the worse.

For instance, let us see what the impact on Bordeaux wines could be, looking ahead to the Bordeaux 2015 en primeur campaign.  An exact figure on what percentage of en primeur sales is represented by the UK is hard to discern.  However, most experts and professionals indicate such UK market share to be around 20% (conservatively), with the lion’s share accounted for by the “big boys”.  The latest market figures from Bordeaux négociants indicate that the 2013 vintage (the one currently on sale, just as the 2015 en primeurs have been tasted) is being offered at either at or below release price in 90% of cases.  The highest upsurge, with 74%, is Petit Mouton, and the worst fall with 7% is Pagodes Cos d’Estournel.  Even the better quality 2012 vintage has 55% of Châteaux being available either at or under release price, and just 45% recording an increase since en primeur.  Source: Eleanor Wine (February 2016).  It has been pretty much common sense that Bordeaux 2015 exit prices (excluding Brexit effects) will be higher than the last few years.  The UK has never been part of the Euro zone, but Pound Sterling has fallen against the Euro in recent weeks amid uncertainty surrounding the Brexit referendum.  Exchange rates will affect post-Brexit en primeur campaigns making it more expensive to buy Bordeaux wines.

Away from exchange-rate effects, Brexit will be subject of extensive negotiations on a range of issues, meaning it is impossible to clearly define the long-term effect for UK wine consumers.  Nevertheless, until a new trade deal is fixed between the UK and EU, the ground would see European wine likely to become more expensive to UK consumers owing also to the introduction of trade tariffs after the UK will leave the EU.  For instance, as things now are, a 32% tariff would be imposed on imports of EU wine in the UK (a costly toll).  The reason is that the UK has negotiated as part of the EU at the World Trade Organisation (WTO); consequently it is probable that it would inherit the EU’s tariff regime at the time of leaving.  Such WTO tariff for wine is 32%.  Again, optimists hope on the fact that the UK market is so important to Spanish, French and Italian wine producers that one expects at least a significant reduction, if not a deletion, of the WTO’s 32% tariff.

Finally, let us consider that Brexit will also mean the end of EU subsidies to UK wine production industry, the end of favourable export of UK wine within EU borders (think of fizz, for instance), the end of easily available European labour within the UK wine industry as a whole.  A list of post-Brexit regulatory consequences could be very long.

In conclusion, following Brexit, what will happen in present and future is dim and uncertain.  Initially, at least, wines from the EU will be more expensive for UK wine drinkers and this will have an impact not only in the UK, but also on the European wine market as a whole.