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LWF: Uncertainty continues to cloud Brexit debate to 2020 and beyond

Published:  21 May, 2018

With 312 days to go until the UK officially leaves the EU, the effect of economic uncertainty and how the trade is placed to take advantage of opportunities offered by Brexit formed the crux of discussions at one of the opening debates of the London Wine Fair this morning.

WSTA chief executive Miles Beale kicked off the debate with a reminder that the UK is the world’s largest importer of wine by volume after Germany and second in value behind the US, making the UK “a very significant market” economically, and one that is “intensely reliant on global trade, which is why Brexit matters”.

Since last year’s Brexit panel discussion at the LWF, the UK has moved forward with the European Council discussions in March which Beale referred to as an “important staging post” for establishing the UK’s financial divorce settlement, citizens’ rights, and most importantly, a transition period for the UK exiting the EU, due to last from Brexit D-Day on 29 March 2019 to 31 December 2020.

However, Beale remains sceptical as to whether this transition period will come to fruition, advising companies to prepare for both a transitional period to the end of 2020 or longer, and also for the possibility of a “cliff edge Brexit” in March of next year.

Whether the latter and less favourable scenario comes to bear, hinges on whether or not ministers can decide on what to do about the Irish border.

At the moment, the two solutions on Ireland which have been presented have been “rejected by the EU and cabinet can’t agree on which one it prefers”, said Beale, leaving government and all who are rooting for a smooth exit a lot to do in a short amount of time.

If a solution cannot be agreed by March next year, the UK will face a default “hard Brexit” without the possibility of a transition period to agree things like free trade agreements.

“The UK can’t sign up to future arrangements until it has left the EU,” Simon Stannard, European and international affairs director at the WSTA told Harpers. “A transition period would allow for time to negotiate trade agreements.”

But if a decision is not made on the Irish border by March 2019, a “hard border would automatically be put in place and customs tariffs would be imposed on goods coming from the EU in the same way that tariffs are imposed on goods coming from outside the EU”.

Beale added: “December 2017 was the first sign of meaningful progress, followed by March 2018 at the European Council meetings. But it’s important to note that nothing is agreed until everything agreed, so it doesn’t give us a very clear idea of what is going to happen.”

Uncertainty therefore is far from being resolved and continues to deter those looking to invest.

This point was made by LWF panellist Jean-Marie Barillere, president of the Union des Maisons de Champagne and a counterpart to Beale working with a similar trade organisation in France.

Barillere was keen to argue against disruption to 300 years of trade between the UK and the continent.

However, the depreciation of the pound, low profitabilty and slow negotiations have led the UK to become “very pessimistic market for European wines” over the past two to three years.

Other panellists noted new opportunities being presented, as the UK trade finds itself re-evaluating how to re-gain momentum in investment and profit. 

Troy Christensen, CEO of Enotria & Coe, said: “Premiumisation is going on out there, but it’s only going to help if we take advantage of it. Brexit has become a magnification of business decisions. Gin is up 23% and Prosecco has seen phenomenal growth, which shows they must be doing something right. How we succeed from here depends on how we operate. It’s going to require strong business leadership.”

For now, the WSTA continues to confer with its counterparts on both sides of the Channel and UK government for a negotiated outcome "as soon as possible".

One of the problems the WSTA faces is the power that the wine and spirits industry wields to lobby ministers.

Beale gives the example of aeronautics company Airbus, which makes a million crossings over the Channel to produce just one of their products.

“There is the argument that we’re an industry mainly concerned with goods rather than services, capital or people, and therefore not best placed to lobby UK ministers,” said Beale. 

“We’re not one of most influential industries, but we’re also a lot more simple. We have to make more noise to get noticed, but the good news is that it should be easier to reach the outcome that the whole industry wants.”

For the full report on the LWF Brexit panel debate, see the June issue of Harpers out at the beginning of next month.