The news of Britain’s vote to leave the European Union (also known as “Brexit”) has been met with shock and disbelief. After mutual recriminations and wild speculation, a divided country now tries to grasp the full economic impact of this momentous decision. The outlook of wine industry members is one of widespread uncertainty amid market turmoil and exchange-rate volatility.
Currency woes and rising costs are foremost in people’s minds, followed by fears of the wider economic impact and the legal framework to replace existing regulations.
“While most importers will have forward-bought currency, those reserves will eventually run out. Unless the pound rises in the interim, we will see a marked increase in the cost of goods,” says Alex Hunt MW, purchasing director at importer Berkmann Wine Cellars in London.
This is not just a British pound/euro issue. The pound has weakened against all currencies, and as such, imported wines from all countries are set to get appreciably more expensive.”
Pointing to the wine industry’s vulnerability as an inherently “low-margin sector,” Hunt adds, “While the E.U. machine is often tarred with hellish visions of interminable bureaucracy, from the point of view of the trader, it is enormously efficient.”
“Unless the pound rises in the interim, we will see a marked increase in the cost of goods.” —Alex Hunt MW
Charlie Young, director of Vinoteca—a chain of five wine bars across London—mainly worries about the impact on staff for the British, and in particular London, hospitality scene, which relies heavily on a young, mobile and international workforce.
“The majority of our 160-strong team are from Europe,” says Young. “Many of them feel worried, unsure and alienated, as they don’t know what is coming.” He thinks a less favorable immigration policy may have “devastating” consequences. Countless European youngsters facing high youth unemployment at home have flocked to work in London.
Gary Boom, managing director of fine wine merchant Bordeaux Index, also in London, sounds a different note. “The recent weakness of the pound has been a fillip for wine prices as purchasing power of non-UK markets has been enhanced. It has become cheaper for our Asia/U.S./E.U. customers to buy from the U.K., as evidenced by a large number of significant orders placed from Asia almost as soon as the outcome was announced.”
Regarding the regulatory outlook, Boom is positive. “We think it is unlikely that European wine-producing countries will force the UK to accept additional import tariffs. The U.K. is a significant market, particularly at the fine-wine end, and wine producers need to sell their wine, so they will want us in the U.K. to continue to buy it,” he says.
Wine producers in England’s fledgling wine-industry acknowledge the mammoth task of negotiating new trade deals, but some are hopeful.
“While we felt our business was stronger in the E.U., we will now work hard to continue our success with exports and building our brand in an increasingly competitive international market place,” says Tamara Roberts, chief executive officer at Ridgeview, one of England’s foremost sparkling wine producers. “We have to hope that the government is capable of negotiating the best possible trade agreements as quickly as possible to prevent our economy slipping back into recession.”
Julia Trustram Eve, marketing director of English Wine Producers is positive. “The British wine industry remains excited and optimistic about its future and will support and work alongside the trade bodies and government to ensure we retain a strong voice.”
As the public and politicians alike grapple with Britain’s new status, it remains to be seen whether the results of the referendum will lead to one big hangover for their economy.