Daniel Lambert: Outing Brexit's looming costs

Published: 20 May, 2017

Daniel Lambert of Daniel Lambert Wines calls for clarity on the likely levels of trade tariffs after 1 April 2019 and argues that the public should be told

It's widely accepted in the wine trade that Brexit is a pretty bad idea. But the referendum's outcome is not what I want to re-hash. What I expect from our current government is that they need to be clear and open with the people of the UK in all aspects of Brexit.

The UK has a massive choice to make on 8 June in the coming UK general election. However, as with the referendum, the stark truth about Brexit is still being hidden by the mass media. Furthermore, the UK's elites are in no rush to change the status quo. People in all walks of life need to make informed judgements. This is where as an industry we can at least inform people what will happen to wine retail prices if the UK goes through with a ‘hard Brexit’.

All wine agencies and importers know, understand and agree that there are a number of taxes that need to be paid on wine, in order for it to be traded in the UK. Checking the figures recently, it's £10.6bn in total for all alcohol receipts (https://www.statista.com/statistics/284336/united-kingdom-hmrc-tax-receipts-alcohol-duties-by-type/). Therefore, we are doing our bit as an industry and our voice should be heard.

The UK is currently a member of the EU trading block of 28 countries, and will remain so until March 2019. For the past 44 years the EU has arranged all our trading agreements with the rest of the world, as well as for the other 27 EU members.

My question is simple - what happens on 1 April 2019?

It might be a simple question but it would appear that nobody knows the (honest) answer.

Trade deals

When the UK leaves the EU it will have no trade agreements in place with any nation in the world, as things stand today. Therefore, WTO basic import tariffs take effect straight away. Should that worry us? Absolutely…

The average trade deal, as history shows us, takes a minimum of 5 years to agree on. The much talked about EU-Canada deal has taken 15 years to agree, Moreover, wine is just one of the thousands of commodities that the UK needs to agree a trade deal on, from over 200 countries in a very limited 22-month period. Wine is not going to get special treatment. It's going to be lumped in with everything else from sugar to wheat to steel, etc. This is the reality of Brexit.

We are being told that if the current government is re-elected, they will adopt the trade deals the EU has gained from the rest of the world. Really? Let's think about that for a moment. The EU has circa 510m citizens for its basis to work from. Thanks to immigration, the UK has 70m citizens for its basis to work from. Why would any country in the world offer the same terms the EU has to the UK?

I am not sure it will happen (especially in 22 months) when the UK market is six times smaller than the EU. Then, of course, let's not ignore the rather sizeable elephant in the room - the EU itself.

I think it's safe to say the EU has made their position abundantly clear. The UK will not have the same deal outside the EU that it has inside the EU.

So back to the question - what will happen in 22 months?

The WSTA has been asked by the UK government to start talks with wine-producing nations. It's good to know that at least some talks have started. The WSTA have confirmed that so far, they have spoken to New Zealand and USA officials. That leaves another 40 or so countries that have not been spoken to as yet. They have also confirmed that the plan is to have the same trade deals in place that the EU has with wine-producing nations around the world. That's very optimistic at best.

So why is this all so important? It all comes down to tariffs from both non-EU countries and the EU itself. Currently all wine entering the UK from the EU is tariff-free.

However, if an agreement is not reached within 22 months then tariffs will apply to all goods and services entering and exiting the UK on a global basis.

Basic tariffs

The tariff on wine will vary from country-to-country, although the actual figures seem very hard to come by – even the WSTA seems unable to add clarity on this. There are reports it could be as much 32%; there are other reports it may be zero. I have heard suppliers in New World producing regions saying it will be 15%, according to their local wine-producing body. So it's still very unclear. If it were 32%, that would double retail prices overnight by the time all margins in the supply chain have been applied from current levels.

For me, it's wholly unacceptable that we don't have a clear picture of what the achievable goal is. This government is seeking re-election, but does not want to talk about trade tariffs. Hardly surprising as this is likely to be the noose around the UK economy for years, and even decades, to come.

Every industry needs to be shouting from the rooftops about this.

The points I have raised are not currently being debated in the public arena, but these are some of the really important issues facing the UK. These issues dramatically affect the ability to trade effectively on a global basis. Without effective trade agreements, there will be a much-reduced UK economy.

The UK public needs to wake up to this before the 8th June. You can be sure, when people have to pay 10%, 20%, 30% or even 40% more for food, fuel, services and pretty much everything else, they won't care about border controls. However, by then it will be too late to do anything about it.

As an industry, we need to get the message out to consumers. This is what is going to happen to wine in 22 months if we go for a ‘hard Brexit’. Hopefully the other industries in the UK will follow suit and make it clear what's at stake.

Finally I close with a video of David Davis PM. This for me sums up quite well just how bad things are looking for the UK from 1 April 2019.

https://twitter.com/faisalislam/status/842161838741696513

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