Brexit: Wine Prices Are Rising Already

Fears that wine would become more expensive in the UK after Brexit have proven correct as new market research has revealed price rises in a turbulent industry that faces deep uncertainty. More upmarket wines have had the steepest price rises since the Brexit referendum thanks to a combination of a weaker pound and rises in alcohol duty.

Jacob’s not up the Creek

According to detailed research by premium wine distributor Concha y Toro, there has been a “significant step change” in the price of wine since December 2016, with market research data showing a 17 pence price rise for the average bottle in the following six months.

Experts believe that by next summer average wine prices will have risen by 44 pence a bottle since the referendum. That is compared to a rise of just 4 pence in the 18 months before June 2016.

There is still hope for more mainstream wines according to market research by the consumer magazine Which?. A comparison of hundreds of supermarket prices found that cheaper wines had remained fairly stable and major brands like Jacob’s Creek and Blossom Hill had cut the prices of some of their wines by 5%.

In March the wine industry was also angered by Chancellor Philip Hammond’s announcement that wine duty averaging  £2.16 per bottle would increase with inflation despite the Wine and Spirit Trade Association having asked for a 2% cut because of Brexit’s impact on the pound.

The association said the cost of importing wine had risen by 15% since the referendum and warned that it would be enormously disruptive to leave the EU without first reaching a deal that insulates the wine trade with the EU. Chief executive Miles Beale said the UK produces relatively little wine but soaks up 15% of the world’s wine exports, making it highly vulnerable to any new trade barriers. “More than two-thirds of our trade in wine is with the EU and if prices are to be affordable for most consumers then a pragmatic solution needs to be agreed with the EU as a priority,” he said.

Future Wine Prices

A study sponsored by the Chatham House think tank and the University of Sussex warned in May that leaving the EU could lift wine prices in the UK by 22% by the year 2025 unless a deal was reached to avoid new trade barriers.

Professor Kym Anderson of the Wine Economics Research Centre at the University of Adelaide (left) predicted the price hike in the Chatham House-backed study after using a model that took account of Brexit’s role in weakening the pound and reducing expected economic growth until 2025.

The study assumed that prices would rise by about 4% as a result of the UK taking the EU’s external import tariff and applying it to products from EU member states and Chile and South Africa, which have preferential access to the EU market.

That tariff will form a crucial aspect of trade negotiations – which have been delayed by the slow progress on issues such as citizen’s rights. Nevertheless the UK’s status as one of the world’s biggest consumers of wine means the EU, the biggest wine producer, will be under pressure to avoid destructive tariffs.

The Chatham House model predicted that the main hike in wine prices would flow from the long-term fall in the buying power of the pound as a result of Brexit, which would hurt inflation and disposable incomes. In the event of a “hard Brexit”, falling back on the World Trade Organisation’s wine tariff of 32% would do major damage to the UK wine market.

Swedish economist and writer Fredrik Erixon told The Spectator that “to deny Britain a free-trade agreement would be an extraordinary act of self-harm for all sides. To use the tariffs and rules of the WTO would mean greater barriers and slower trade. French farmers and winemakers don’t want to see British duties on Beaujolais and Camembert.”

by Stewart Vickers

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