Nothing’s ever straightforward in politics. When Britain decided it was to leave the UK, most of us knew that this decision would come with copious amounts of twists and turns before it settled. We’re still meandering our way through the process and the fact that there is an extraordinary amount of noise, as opposed to news, circulating the media makes it all the more confusing. Where there is confusion, there is anxiety and that isn’t good for the markets. Investors are understandably flummoxed as to what they ought to be doing, and what their plans should look like should any of the various proposed Brexit deals be announced and confirmed.
As with anything, it’s always useful to observe what the significant individuals and organisations in your sector are doing – how are they preparing? What are their positions?
Curiously, after doing some digging, it appears that many of the big players in the fine wine market are taking different approaches. There doesn’t seem to be a common position among them, particularly when it comes to the possibility of a ‘no-deal’ scenario. Some have taken the opportunity to get their heads down and wallets out, creating costly, complex contingency plans involving pre-purchasing euros for the en primeur campaign to come and using storage to stockpile retail wines to navigate around any impending Brexit disruption. On the other hand, others are doing nothing. Either they’re biding their time or they’re banking on the idea that Britain will leave with a deal.
Import duties have big question marks over them and this causes confusion for consumers. For those in the trade, it is a non-issue because the WTO’s default rate of duty on wine is low and linked to the amount of alcohol in the bottle and the volume sold; not the price of the bottle or case. Furthermore, the UK government published a tariff level of zero on all imported wine – this means the current trading regime remains unchanged. A more meddling factor is chaos at the border if there is a no-deal situation, there is real anxiety around this. Hence, those with spare warehousing are stockpiling and pre-purchasing in anticipation of disruption. The expected drop of the Pound in the face of no-deal, gives additional rationale to this approach.