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How Will Brexit Affect the U.K. Wine Market?

Woman shopping wine in supermarket

When voters in the United Kingdom voted to leave the European Union in June 2016, much of the world reacted with shock and global markets braced for uncertainty. Some experts on international trade predicted that by choosing to leave the EU, Britain would eventually have to enact new trade regulations that would affect every area of international commerce and negatively impact economies worldwide.

Since the U.K. is one of the largest markets for wine in the world, the result of the Brexit referendum has raised particular concern among wine producers, importers, distributors and consumers across the globe about the future of the industry. Today, as Theresa May prepares to invoke Article 50 to begin the process of leaving the European Union, those concerns are becoming even more pressing. Wine enthusiasts want to know: What does Brexit mean for the global wine market and the U.K. wine market in particular?

Falling Pound

Since voting to leave the EU, the British pound has lost more than 10 percent of its value against the euro, driving up the cost of foreign imports. This affects prices of all imported products, including wine. Combined with uncertainty about what trade laws implemented by a newly-independent U.K. might look like, this increase in costs is already having an impact on the wine business in Europe, with some Spanish wine exporters reporting a slowdown in shipments of product to the U.K. and other EU exporters pausing planned shipments until new trade regulations are established.

The flip side of the pound's reduced value means wines priced in English pounds are cheaper to buy with foreign currency. This has prompted an uptick in sales of wines sold to international buyers from U.K. distributors, according to some reports. But since almost all of the wine consumed in the U.K. is imported, much of it from EU countries, the pound's declining value also means higher prices in general for wine consumers in the U.K.

Stable Demand

One thing remains certain: U.K. residents will continue to drink wine. If the pound remains depressed in relation to the euro for a long period, it could lead to a decline in consumption of imported wines in the U.K. and a corresponding increase in sales of domestic wines. This could theoretically benefit English wine producers, who have been enjoying increasing success in terms of production, recognition and sales in recent years. This possibility might comfort members of the U.K.'s Wine and Spirit Trade Association (WSTA), of whom nearly 100% had wanted the U.K. to remain part of the EU.

While wine consumption is expected to remain stable in the future, some countries expect that overall trade with an independent U.K. will decline in the near term. Export Development Canada reported that they expect bilateral trade with the U.K. to fall by around 8 percent by 2018, but recently opened a new office in London despite the prediction.

For Britain, part of the process of leaving the EU also involves recovering assets that are held by the Brussels government, which apparently includes a substantial amount of wine.

Having Their Wine, and Drinking It Too

Wine producers in the U.K. represented by the English Wine Producers (EWP) and United Kingdom Vineyards Association (UKVA) are pressuring the British government to continue to allow seasonal workers from EU countries to continue to work at U.K. wine production facilities. They also want wine imports to the U.K. and exports to the EU to benefit from zero tariffs. While these demands may seem entirely in the U.K.'s self-interest, far more EU wine is imported to the U.K. than vice-versa, meaning that a zero tariff scheme would benefit EU producers and exporters most of all.

At the moment, the only thing certain about how the U.K.s departure from the EU will affect wine markets is the uncertainty of the situation. While available information indicates that the U.K. wine market will be undergoing a transformation in the years to come, just how completely it will change remains to be seen.

Nathan Munn | Global Wine & Spirits