Breaking down the cloud of uncertainty brought about by Brexit into manageable bite-sized pieces was the order of the hour at the London Wine Fair’s Brexit debate this afternoon.

A panel of industry experts from political, economic, legal and business backgrounds framed the general “Brexit debate” hanging over the industry by looking at what can and can’t be predicted, and also by prioritizing some of the concerns.

One of the issues widely predicted to cause mass headaches following the referendum has been the effect on trade tariffs.

But from an economics view, Dr. Swati Dhingra from the London School of Economics argued that non-tariff barriers such as foreign investment will have the far bigger impact.

“If we leave the single market and the EU, the impact on tariffs would be between 1% and 3% - probably around 1.5%. But non-tariff barriers, such as a lack of foreign investment, have the much bigger potential to contribute to a reduction of GDP.

“If foreign investment starts to dry up because companies no longer want to use the UK as a big export platform, that’s where the big effects come from.

“However, it is more difficult to predict exactly what impact might be. It could be anywhere between 2% and 8% or perhaps more. It depends on how you interpret numbers.”  

The effect of such economic uncertainty on the UK’s Spanish partners was highlighted by research carried out by co-panellist Dr. Abel D. Alonso, from Liverpool Business School.

Dr. Alonso gathered 215 responses from producers at a major wine fair recently in Spain, where the vast majority of respondents had some sort of export relationship with the UK.

“86% of respondents highlighted uncertainty [as a Brexit-related concern],” said Alonso. “49% said Brexit would have a negative impact on the Spanish wine industry, while 25% said it would be positive, and 25% said I don’t know.”

Some of the negative impacts on the Spanish wine industry included price increases due to higher import taxes, Spanish wine brands no longer being exported to the UK (as producers look for opportunities elsewhere) and an increased emphasis on non-EU wines.

WSTA chief exec Miles Beale concurred that non-tariff issues have the higher potential for negatively impacting the trade, pointing to the possibility of the restricted movement of goods.

“It’s the admin issues and getting the product from A to B which is going to be the real difficulty. If you take a hard line on customs borders, it’s hard to see how there will be a smooth flow of goods,” he said.

He referred to tariff agreements which are currently in place with various trading partners around the world, such as Chile, where the EU has an agreement which is so low that in practice it is “essentially the same as no tariff”.

“If the worst case scenario was applied, and for example, if we had to replace a tariff agreement with Chile with one like we have in Australia, then the most tariffs would increase to per bottle of wine would be 10p. The best-case scenario would be 4p.

“To put it in context, Hammond put up tariffs by 8p recently. Yes, tariffs matter but not as much as you might think,” Beale observed.

With the devaluation of the pound coming through in the WSTA’s Quarter 2 market report, the effects of Brexit are already being felt, Beale told the audience.

The length of time needed to recreate favorable trade agreements with places like Chile will also impact the trade, he said.

“Spirits exports from the UK to the EU are almost the same as the amount of wine coming to the UK from the EU. So it’s entirely rational to reach an agreement that suits all parties. The problem is politicians. We need to make sure that as an industry, politicians know what we want.”

“Trying very hard to achieve nothing… to stop patterns of trade changing” is their priority over the next two years – although Beale believes it will take more than five years for the UK to leave the EU and for equivalent trade agreements to be put in place.

Read More at source: Harpers.co.uk