Brexit: the aftermath
Crystal balls are out as pundits try to predict what the UK’s split from Europe means for London as a global trading post, en primeur, exchange rates and demand – and your investments
AS ThE UK, Europe and the wider world digested the shock result of the EU referendum, there were immediate effects on the fine wine market, and the business of London-based merchants in particular.
First, it quashed any lingering signs of life in 2015 Bordeaux en primeur sales. Another lessthan-inspiring campaign – despite the wines’ generally decent quality – was put out of its misery as an already low sterling fell to new depths.
This also sparked a splurge of buying from collectors in the US and Asia (and to a lesser extent, the eurozone) as they sought to exploit favourable exchange rates. ‘The reported increase in demand from US dollar and dollar-pegged buyers is opportunistic buying to boost margin, rather than consumerdriven, and therefore likely to be short-lived unless those savings are passed on,’ says Mike Laing, MD of Armit Wines.
‘Nonetheless, it has enabled sterling-based holders of stocks to move some inventory. They must judge, of course, whether these are stocks they need to replace and, if so, in which currency those will be bought.’
The longer-term impact, as with so much in the post-Brexit world, is far from certain. ‘As with all currency moves, the market will adjust,’ argues Liv-ex director Justin Gibbs. ‘In sterling terms it may rise, but that is crystal-ball stuff. There is plenty of stock in the UK and in Europe to meet demand. The question is really one of demand. I am not sure if Brexit is a spur to demand, beyond the immediate currency effect.’
Laing is also conscious of the wider effect of Brexit, on the eurozone economies in particular. ‘My feeling is that the euro has plenty of its own problems and, while I would much prefer to be part of the EU, the currency negativity against the UK by the financial
markets will subside when Europe starts to confront its own issues,’ he says.
This dissipation of the postBrexit shock should diminish the threat to London as a global centre for fine wine, he believes, arguing that US and Asian buyers will still be drawn to ‘the world’s largest marketplace for properly cellared fine wine’.
Laing adds: ‘If they want to buy the latest vintage or vintages unsold from en primeur campaigns direct from the Bordeaux Place, they can already do that, but the Bordelais will not have forgotten those cancelled Chinese orders from 2010, nor the feast-and-famine approach of the US.’
On London’s future status, Farr Vintners chairman Stephen Browett agrees. ‘The UK trade has great expertise, and the large stockholding of mature vintages in the UK (sourced mainly from customer reserves) will ensure continuity of supply,’ he says.
Farr, for example, currently lists wines worth about £15m – but looks after customer reserves valued at more than £360m. ‘As 50% of our sales are export, we expect sterling