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April 1, 2021updated 04 Feb 2022 1:02pm

How is the wine industry coping with Brexit? – comment

After over four years of wrangling, Brexit's tires hit the tarmac on 1 January. The end of the 11-month transition period after the UK left the European Union on 31 January last year signalled the 'new normal' for trading relations between the two sides. So, how's it going? Wine category commentator Chris Losh has all the gory details.

After over four years of wrangling, Brexit’s tires hit the tarmac on 1 January. The end of the 11-month transition period after the UK left the European Union on 31 January last year signalled the ‘new normal’ for trading relations between the two sides. So, how’s it going? Wine category commentator Chris Losh has all the gory details.

For anyone wondering how the UK’s wine trade might get on post-Brexit, the last six weeks have made for sombre – if predictable – viewing.

Three images on ‘Wine Twitter’ sum up the whole sorry mess. First, there was a picture of a teetering mountain of papers on a wine importer’s desk – all, they said, generated by extra form-filling required since Brexit. Then. what looked like a lengthy and complicated board game, but was, in fact, a graphic showing the stages required to ship a pork chop from Scotland to Paris: Something that would have been accomplished in one step prior to leaving the EU now took (from memory) 15.

Finally – and most damningly – there was the line graph of business being done with Europe in January, which resembled nothing so much as a vertical drop into the abyss. The Office for National Statistics estimated a GBP6.6bn (US$9.1bn) fall in imports from the EU in the first month after departure.

Admittedly, this situation will have been exacerbated by a third COVID lockdown. And it’s likely, too, that some wine businesses may have been stockpiling at the end of last year, to counter the expected supply glitches. Indeed, February’s figures – which are yet to be published – might show an uptick. But, even allowing for these factors, the pattern is plain: Moving goods in and out of the EU just got significantly harder.

This matters. The UK is a major shop window for wine, and two-thirds of the wines it sells come from across the Channel. It’s little wonder, then, that the voices raised in protest since the turn of the year have reached a level that even the Government can’t ignore.

Most of the UK’s wine industry has been grumbling about the likely impact of Brexit ever since the referendum in 2016, but it’s taken the pain of the reality – and some powerful media work to highlight it – to bring the Government to the table. There have been sizable articles in broadsheet newspapers, appearances on national TV and agenda-setting radio phone-ins, not to mention a torrent of social media.

Always, the reaction has been the same: Incredulity. How did this happen? And, more to the point, what is it doing to the industry?

The fundamental problem for the UK’s wine importers is that they have been hit by a triple whammy. Importing from the EU has become simultaneously slower, more complicated and more expensive. With extra costs at pretty much every stage, importer/agent Daniel Lambert (who has become the de facto voice of wine’s Brexit pain) estimates that the cost of bringing in a single pallet of wine has gone up from GBP150 to GBP400. And, this is a best-case scenario. If a pallet is made up of multiple different wine cases, each one of those different wines will attract additional charges.

This reality has, as one importer puts it, “killed groupage stone dead”. The latter practice – grouping together small numbers of cases of multiple wines or many different producers – was much used by smaller importers and independent retailers.

In 2020, these were the only part of the UK’s wine industry to have had a ‘good’ COVID. But, many will now be forced to cut their ranges. The new reality – as voted for by 52% of their own customers – has hit their USP squarely between the eyes.

Elsewhere, businesses shipping in large volumes will accrue proportionally smaller charges and ought to be able to swallow them or pass them on. But, they have logistical problems. According to Lambert, lead times have increased from ten days to five weeks, and the delay is getting worse all the time. By the autumn, UK businesses importing wine from Europe could face a delay from ordering to delivery of around two months.

There are countless stories of containers of wine stuck on docksides while additional information is sourced. It only takes one winery with incorrect paperwork to hold up dozens of correctly logged imports in the same container.

Needless to say, this is bad for everyone, but it’s especially bad for supermarkets, who have built their business models on ‘just-in-time’ fulfilment and slick logistics. They cannot – and will not – build extra storage space to mitigate against non-arrival of supply. Promotional schedules are being changed on the hoof, depending on what is available, shelves are emptier and – once again – choice is suffering.

How any of this will change when restaurants reopen fully in May is anybody’s guess. Most of the hospitality channel in the UK has been effectively shut for a year, so their sudden return to the supply chain – while welcome – is unlikely to make an already chaotic system any less so.

And yet, bizarrely, it could have been worse – and one element of it might even be about to get better. The Wine & Spirit Trade Association scored a significant victory in getting Vi-1 forms – a thoroughly unnecessary bit of ‘import protocol’ – temporarily removed from the UK Government’s new trading relationship with the EU in January. These should have taken effect in July, and would have ratcheted up costs and paperwork to a probably fatal level. Hearteningly, last week, their imposition was deferred by a further six months, and the WSTA is now hopeful that they could be abandoned entirely.

This would be unequivocally good news.

Vi-1s are a big part of EU trade policy, designed, essentially, as a protectionist measure to make it harder for goods to come in from outside. For the UK government to continue this policy once it left the EU made no sense at all, particularly since, a) it was supposedly trying to rid itself of unnecessarily restrictive EU bureaucracy, and b) it was going to badly hurt domestic businesses in the process.

The UK is likely to put Vi-1s on the table when it negotiates trade arrangements with New World countries. Importing these wines, at least, could get quicker and cheaper than it is now.

A similar freeing up of restrictions for European imports would be welcome. Lambert is “very confident that in two or three months, all Vi-1s will be history”.  If true, it would be quite a turnaround – an unexpected Brexit dividend for the UK.

It’s just to be hoped that, with increased costs and bureaucracy and a struggling logistics system, there will still be a functioning wine industry around to take advantage of it.

Click here for more wine industry commentary from Chris Losh

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