The impact of Brexit on the UK wine industry

Christof and Louise Hoepler were invited by the allumini of Salzburg University to speak about the impact of Brexit on the UK wine industry last week at the Austrian Trade Commission in London.  We adressed the many new issues facing the indusry alongside Lord Green (a former Chairman of HSBC Holdings plc and Minister of State for Trade and Investment) who discussed his views on ‘ Britain and the EU, new relationships’.

As a business that exports the majority of our production and who has been exporting to the UK for over 40 years, we have been heavily involved in helping increase the awareness of Austrian wine across the world and have witnessed the industry evolve over many decades.

It is not just Brexit

The export statistics of Austrian wine sold to the UK show that volume and value fell significantly in 2022 but    caution is required in interpreting this.  Firstly the numbers are small (£5.6mill fell to £3.5mill and volumes halved to 630,000 litres) and our guess is that the number is incorrect as wine was likely imported via a 2nd country, en route, which did not show up in the statistics.  Drawing conclusions that Brexit was the cause is too simple and probably wrong. Fortunately our numbers to the UK were and are positive.

To fully understand the drivers in the industry it is neccessary to understand Brexit in context of all the other regulatory and fiscal challenges facing the UK drinks industry. Brexit brought additional logistical customs checks for wine imported to the UK from Europe, which should not have been too much of a challenge (wineries and importers are used to dealing with customs authorities across the world) but, in this case, the new rules charged a customs fee of around £135 per consignment. This benefits larger players who bring in containers of wine from a single winery. Wines from small and mid-sized wineries are usually sent in pallets and consolidated by logistic companies before crossing the channel. This means the fee on a single pallet of 100 cases costs £1.35 a case or 23p per bottle versus 3p per case or 0.5p per bottle for a container.

So the short answer is, in isolation, Brexit brought with it annoying but manageable costs that benefited the larger wineries and importers.


New UK labelling laws

Unfortunately, the changes did not stop there. As of January 2024, the UK legislated new back labels for wine sold in the UK to include the postcode and name of the UK importer. The result is European wineries must print and label their UK wines separately to their European ones. For smaller volumes like ours this adds disproportionate cost and time delays as we now only label the wines destined for the UK once we get an order (if we pre label we are unable to sell the wine anywhere else). In the past we took stock from the warehouse and the pallet was ready to go the next morning. Now we have to re deploy colleagues from the vineyards to label and prepare the order, on an individual basis for the UK. If there is a pressing weather situation the order has to wait.

A burdensome new UK duty regime

And…from February 2025 the UK Government will introduce a complex duty regime that according to the Financial Times will, ” drive up prices, reduce consumer choice and tie up small businesses in red tape”. The new duty on wine will increase by increments of 2 pence for every 0.1 per cent increase in alcohol content. This means the UK wine industry is moving from a high tax regime with simple flat bands of tax, to a high tax regime with approximately 30 different bands.  This makes end market pricing harder to predict and likely to be volatile. Wine is a natural product and it is not possible to control the amount of alcohol, without breaking many other wine making laws (that would put us all in jail!). Our wines range from 11.5-12.5% in cooler years to 13.5% in a warmer years. This would add or detract around 5% to the end market price, something that retailers and restaurants hate as they target key price points in their planning.

Our sources both small and large, and regardless of political affiliation, are giving a clear message; this new regime will not be more simple for the industry (a claim the government is making) and it will cost more.  The Wine Society has said it will cost £400,000 investment in systems to accomodate the changes and another large distributor has stated they will need to add 2 full time people in logsitics and pricing, 8% of their workforce.

If it’s not broken don’t fix it

In summary, it is not just Brexit but the layering of legislation and additional cost that has neither the consumer or increased tax generation at its heart. The choice of wines for informed consumers in the UK is unparalleled. The UK government recieves over £12billion in alcohol duty a year, which is more than the entire of the EU put together. Alcohol duty has grown faster than inflation, despite flat volumes, and the industry employs over 400,000 people (according to the WSTA). As the 3rd largest importer of wine in the world the UK is also a key market for brand building and training, a place where sommeliers once flocked to broaden their exposure to wines from all over the globe. Brexit was meant to bring less red tape not more and it appears these ‘rule makers’ are unable to make other economic connections that also drives employment; that hard working distributors supply an incredible range of wines to all corners of the country and wines are a key profit driver for successful restaurants. That a strong regional gastro scene brings tourists…that Scotland and Cornwall are clear evidence of this. The list goes on….

So our view is why jepodise what appears to be a success story?  One well known contact has already stopped importing from some wineries in Europe. The economics did not make sense and high quality wineries can sell their wines in other countries for better prices. There is still time to avert from the proposed path and we know that behind all the noise there are groups of wonderful, interested customers willing to pay fair prices for good quality wine. In the mean time we will be patient and will work hard to continue to support our UK partners.  We have seen markets go up and down in many countries, things can change!

Frohes neues Jahr 2024

Wir sind ab dem 8. Januar wieder für Euch da!

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