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At the 11th hour, how will a no-deal Brexit affect the wine trade?

Published:  16 October, 2019

As the UK fruit and vegetable harvest gets into full swing in the looming shadow of Brexit, headlines such as The Guardian’s ‘Tonnes of crops left to rot as farms struggle to recruit EU workers’ are becoming commonplace.

The article describes in grim detail how a shortage of farm workers of 30% or more in September has resulted in farmers leaving crops such as berries, apples and beans in the field and the orchard to rot, with the National Farmers’ Union citing Brexit fears and fall in sterling as the primary reasons.

Speaking to grape growers and vineyard managers, this shortage of staff is less of an issue for the 2019 grape harvest (although there are real fears for future vintages), as many vineyards have already picked their entire crop.

The effects of a weak sterling and uncertainty around Brexit have already started to hit home higher up the food chain, however, and it’s particularly acute in the on-trade where restaurant owners and managers are very worried.

Mike Turner, co-owner of La Ferme in London’s Primrose Hill sees three main Brexit-related issues at present that are causing him and the trade uncertainties; staff recruitment, supplier relations and consumer insecurity.

“There are not a huge number of young French, Italian and Spanish workers coming over so it’s very tough to fill out positions,” he begins. “Suppliers are twitchy, and because there’s been a spike in restaurants going out of business in the last two years, payment terms are getting tighter, which is very tricky to budget for.”

“Consumers aren’t exactly throwing the cash around at the minute,” he concludes.

His main worry is staffing and he believes that it’s a wider problem than simply Brexit, but it is hugely compounded by potential staff seeing the UK as an unattractive option due to the message that Brexit sends out. “Most of our staff are non-UK workers and just how it is in hospitality in London,” he says.

“Until UK attitudes change and we see it as a job rather than a part-time way of making money then we’ll always be reliant on abroad for waiters and kitchen staff. The uncertainty [of Brexit] means fewer people are coming over. Restaurants are struggling for good staff.”

For Thor Gudmundsson, owner of The Wine Rooms in Brackenbury and Kensington, staffing isn’t too much of a concern and he’s not experienced much change in the flow of EU job applicants compared to the pre-referendum situation. He is more worried about exchange rates and disruption to supply and says that since the 2016 referendum FX has been had an impact on his business as most of his wine comes from outside of the UK.

“To an extent we can manage the impact by buying South African rather than European wine, and through list management, but when sterling is weak we end up having to pass most of that weakness on to our guests,” he says.

In terms of managing stock and supply, especially with Christmas just around the corner, he’s confident that even in a no-deal situation wine imports won’t be badly affected. “Our view has been that most of the heavy lifting in terms of consequences will be done by our suppliers (food and booze importers), and we are mindful of the unwarranted panic around Y2K. Keep calm and carry on mostly sums it up,” he says.

“I think our suppliers also know the drill; obviously it’s more of an issue for perishable goods than alcohol, and we think we’re 80% covered for Christmas, and the rest is outside of our control.”

Turner is less optimistic. “If we crash out with no-deal, then on top of the short term economic shock that will stop people spending their money, it’s a general mood thing. The atmosphere in this country has been oppressively negative in the past three years. If no-deal happens, I just don’t see how anyone with a brain in their head isn’t going to be completely fed up. That’s not a good atmosphere to try and keep a restaurant going in… I can’t see us selling out our Christmas Champagne dinner, put it that way.”

Looking beyond the EU, Roger Jones from The Harrow at Little Bedwyn, who has a forward-thinking wine list with a huge nod to the new world, believes there will be opportunities when it comes to sourcing wines from outside Europe.

“The majority of our wines are non-European,” he says. “I see us getting a better deal with Australia, New Zealand and South Africa; these guys are buoyant about the prospects of lower tariffs and a way forward. If Europe wants to spite themselves and not want to deal with us that would be mad.”

It’s clear that the uncertainly of Brexit and the prospect of leaving the EU without a deal is already affecting the on-trade, but what about independent merchants?

“At this stage there has been very little impact, but inevitably if we come out without a deal it’s going to affect the confidence of the public and thus sales,” says Ted Sandbach from the Oxford Wine Company.

It’s a view shared by Loki Wines’ Phil Innes who adds that while he hasn’t felt any material effect yet the uncertainty is making him more cautious when it comes to expansion plans.

Both merchants are no-deal-proofing their businesses by ordering extra stock ahead of their busiest time of the year. “We stockpiled in March and we have brought forward our Christmas ordering by a week or so to make sure that we have stock in store in-case the worst case happens,” says Innes.

Sandbach has ordered early too as he’s aware that he may need to allow longer for orders to arrive. “Ultimately no privately owned wine company can afford to hold excessive stock in anticipation of issues arising,” he adds.

Loki, meanwhile, are just as worried about pricing as having a full stockroom. Innes, like many other merchants, has already factored in currency fluctuations to his pricing and customers haven’t complained so far as there seems to be a good understanding of the issues facing the pound.

“I do believe that we are at a tipping point and consumers will not accept another rise in prices,” he says before offering his wider view on Brexit. “It will have a detrimental impact on the wine trade, and the wider economy in general.”

Turner puts it a little more bluntly. “The trouble for the restaurant business is that we’re looking, at the very least, at 10 years of economic difficulty. That’s not scaremongering, that’s just reality. We can’t have decade long views… the landlord needs the rent next week, not in 2030. So in truth I’m struggling to see a massive upside for our business. But we’ll keep going; the food will still be great, the atmosphere will still be great, I’ll keep putting on the wine dinners. We’ve all just got to keep dancing ‘til someone turns off the music.”