Cutting ties: What a no-deal Brexit would mean for the UK wine trade

Chris Losh

Chris Losh

25 October 2020

It’s been knocked off the front pages due to you know what, but a no-deal Brexit would bring huge upheaval for those who bring wines into the UK, says Chris Losh

There’s no shortage of justifiable pessimism around at the moment – particularly in the ontrade. But speaking on a webinar as part of Imbibe Live Online, Bibendum CEO Michael Saunders’ words were still shockingly unequivocal.

‘We are sleepwalking our way into a complete disaster for the wine trade in this country,’ he warned. ‘Brexit could introduce extra costs into the industry that no one has yet understood.’ The words were striking, I think, for three reasons.

Firstly, because Saunders is chairman of the Wine and Spirit Trade Association (WSTA), so was speaking not just with his Bibendum hat on, but as a spokesman for the entire industry. Secondly because his warning had nothing to do with Covid-19; and thirdly because Saunders himself is usually exceptionally positive, so to hear him talk so negatively was a marked change.

Saunders described the rest of this year and the first half of 2021 as looking ‘very uncomfortable’ for the wine trade. To his obvious frustration, the circumstances that are creating this situation are, unlike coronavirus, entirely man-made.

It goes without saying that these circumstances could have a sizeable impact on what hospitality venues can buy and sell and how they might operate.

The death knell for diversity?

One of the peculiarities of Covid-19 is that it has, as comedian Andy Zaltzman put it, ‘killed 95% of other news stories that it’s come into contact with’. Certainly, the drinks trade has been so busy fighting fires that are under its nose that it’s missed the team of burglars pulling up at the back door with a large empty van.

Wines that are more unique and different will get lost in the middle

Diana Rollan

As things stand, the UK is highly likely to leave the EU with no replacement trade deal at the end of this year. Pandemic or not, this will not be consequence-free.

Every shipment of wine from the EU currently arrives quickly and easily, with minimal paperwork. But as of 1 January, every shipment will need to have a VI-1 form. Not only is this time-consuming to complete, involving, as it does, a sample of each wine being tested at an independent laboratory, but it’s expensive too. 

There’s a direct cost for each wine, but also time and staff. One importer will require two extra bodies just to deal with the paperwork.

The WSTA estimates that the new import protocol will generate over half-a million paper forms and cost the industry more than £70m. Importers operate on wafer-thin margins. They need this extra expense like a hole in the head.

As for suppliers, large European wine businesses will be able to set up teams to navigate the bureaucracy, but smaller producers, who may only sell a few dozen cases in the UK, could well decide that it’s not worth the extra hassle.

The UK has a reputation for being one of the most diverse wine markets in the world. In a year, there’s a chance it could be significantly less so.

‘The more you put barriers up to your market, the less people are interested in coming in,’ warns Troy Christensen, CEO of Enotria&Coe.

Besides import regulations, Christensen sees further big issues looming in the wine trade’s rear-view mirror. One is the timing of Brexit. January, traditionally, is the time when the trade’s warehouses are reasonably empty after Christmas.

But massive uncertainty about how easy it will be to bring wine into the UK following 31 December means that many will need to stockpile a couple of months’ worth of stock to avoid a total seizure in their supply lines. Merchants, in other words, are faced with having to stock up simultaneously for their busiest time of year and also any shipping disruption following Brexit.

It means more warehouse space and tying up vast amounts of money in stock at a time when Dry January and Covid-19 mean it could be even longer before they get it back. Get those calculations wrong and businesses certainly go to the wall.

Christensen’s second concern (which is under the radar) is the government’s plans to reform drinks duty.

The latter is currently a hugely fragmented system, with wines, spirits, beers and ciders all paying at different rates under different systems. Not unreasonably, the government wants to simplify things and make the different categories more closely aligned.

Paying dues

This would probably mean spirits paying at a slightly lower rate than currently, and beer/cider paying slightly more. But the fact that the issue is on the table at all at such a turbulent time is making those in the wine trade nervous.

The government has, after all, just taken on unfathomably huge amounts of debt to counter coronavirus, so it’s unlikely that the tax take from booze overall will go down. The best that wine can hope for is to come out no worse than it is now, but Christensen is not optimistic.

Caught between two very powerful lobbies, in both beer and spirits, he says: ‘There’s a risk that wine gets the hit just because we always do...’ And this is before we get onto the kind of horse-trading involved in trade negotiations between the British government and the EU, and the erratic behaviour of Donald Trump.

The incumbent in the White House has already shown that he is not shy of imposing sanctions on trade partners, as chateau owners across Europe will testify.

Size matters

As you struggle to keep your business afloat in a mask-wearing world, you might think that issues such as those mentioned above have nothing to do with you. But you’d be wrong.

Take the increased import bureaucracy. If small wineries decide the extra red tape means the UK is not worth the effort, then these wines will drop off importers’ lists, and restaurants will have fewer wines

to choose from. And it won’t be big-volume Kiwi Sauvignon that disappears.

‘I think there will be a part of the range that will suffer,’ says Diana Rollan, group head of beverage at D&D London restaurants. ‘The smaller producers and more esoteric wines – those might not be able to return to the market here. Wines that are a little more unique and different will get lost in the middle.’

There will be obvious disadvantages, too, for restaurants that currently import some wine directly themselves. Those bringing in wine from Europe will suddenly be faced with increased costs and paperwork. Many will scale back what they’re doing and some might stop altogether. For none will life be easier as of 1 January 2021.

Tate Eats’ CEO, Hamish Anderson, currently brings in 25 different wines directly, over half of them from Albert Boxler in Alsace.

‘We buy one pallet of wine from them every year that might have 15 wines on it,’ he says. ‘The paperwork to ship something like that now would be impenetrable for a business like us. It’ll only really be worth it for volume wines that we’re moving a lot of.’

Smaller importers, he suggests, will probably follow a similar logic, slimming down what they bring in and not taking more esoteric lines.

Producers of rare wines, meanwhile, may well take matters into their own hands. After all, if you can sell a wine seven or eight times over, you’re probably going to do so through the easiest market.

A no-deal drop would make European wines not just harder to import, but even more expensive

If you think this suggests that wine lists will get smaller, well, you’re probably right. But it’s not simply down to less choice. The government’s failure thus far to create any kind of meaningful logistical system for a post-EU world is causing wine importers to have conniptions. ‘How do you plan your business up until December?’ asks one angrily. ‘You have literally no idea how you’re going to move products across the border.’

The fact that importers are rattled does not bode well for the on-trade for whom, as one restaurateur told me, it would previously have been unthinkable to have a dozen wines out of stock on a 100-bin wine list; in six months’ time, gaps and substitutions could be the norm.

For venues with much smaller or singlepage lists, their choice of wines might well be governed as much by the reliability of a product’s deliverability as by its sheer quality or value for money. It’s a depressing thought.

Talking of which, it’s worth keeping an eye on the strength (or not) of the pound as Brexit unfurls. It’s been approximately 20% lower against the Euro since the referendum, making European wines correspondingly more expensive. A no-deal drop would make European wines not just rarer and harder to import, but, you guessed it, even more expensive.

Light relief?

Since we don’t want this article to be four pages of unremitting misery, it’s worth pointing out that there are one or two bright spots. The problems with supply might, for instance, speed up the move towards digital lists, which can, of course, be updated in real time.

James Payne at Fonab Castle in Stirling is surely not alone in switching his house Champagne for a British fizz because ‘it will be more competitively priced and with a direct connection, as we will be able to buy directly from them’.

Vinoteca’s Charlie Young, meanwhile, points out that South African wines – since the Rand has fared even worse than Sterling over the last 10 years – are well placed to take price-sensitive positions on lists as Euro-billed wines just become too expensive.

For the most part, however, the wine trade (like the whole hospitality industry) is looking at a period of immense upheaval that – even without Covid-19 – is likely to lead to less choice, more paperwork, higher prices and erratic supply.

And unlike coronavirus, of course, this impending shitstorm is almost entirely of our own government’s creation. 

This article was first published in the 2020 autumn issue of Imbibe/illustrator: Marie-Helene Jeeves.

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