The UK wine market strangled by red tape

Philip Cox, the British-born co-owner of Romania’s Cramele Recas, currently exports a range of wines to UK retailers. Yet he wonders whether he will still sell to them after 1 January 2021, thanks to a “nightmarish” series of new bureaucratic requirements, the inevitable result of Brexit.

“At the moment, it looks unlikely that the UK will achieve a trade deal with the EU before October; however, many of these new legal requirements will come into force even if the UK secures a tariff-free trading relationship,” he explains. “For example, producers selling into the UK after December 2020 will be forced to include an importer’s label,” meaning they will have to add the importer's name and address to the back label. This will increase the cost of shipping, which will have to be shared between the producers and importers. “I exported four million bottles to the UK in 2019 — 12 different brands." Since Cox says he sells to around 15 different importers, this means "we will probably end up having to make 10 or so different back labels for each product, compared to one at present."

Worse, Cox adds that after the UK leaves the EU, European exporters will no longer benefit from the Excise Movement and Control System (EMCS), the EU database that greatly simplifies the customs process. “Currently, we’re not required to complete an import/export declaration when we move goods to the UK,” says Cox. Instead, “from 1st January 2021, EU exporters selling into the UK will have to complete a full customs declaration, with all the expenses and bureaucracy that entails.” This will happen regardless of the final trading relationship, which means longer queues at ports and higher costs.

“I imagine many EU producers will walk away from the UK in 2021,” he adds.

Everybody affected

These new measures will impact the whole wine trade, whether everyday or fine wine and, according to Wine and Spirits Trade Association (WSTA) chief executive Miles Beale, could cause mass layoffs in 2021. The UK is one of the world’s key wine exporters, due to its status as an important fine wine trading hub; it accounts for just over a third of the world’s £5 bn fine wine trade, a lucrative enterprise that employs thousands of people.

“The document that will really damage the fine wine sector is called a VI-1,” says Beale. “In brief, this document will regulate the movement of all wine entering the UK from the EU under rules that the Government is planning to simply transpose from existing EU law.”

This will place a major burden of responsibility on the importer. “The VI-1 requires a full laboratory analysis of each wine being shipped, including alcohol and acidity,” Beale explains. “This is simply impractical when you’re talking about bringing in small quantities of fine wine. Moreover, the information is irrelevant for shipping declarations.”

Cox says the VI-1 is currently an EU requirement for wine imports from outside the single market and customs union. “The scenario is utterly ludicrous,” he says. “The VI-1 was introduced by the EU as a political project to ensure that wines being imported from outside the single market have a competitive disadvantage. But the whole point of the UK leaving the EU, we’re told, is to diverge away from EU rules and ‘take back control’. Where is the sense in adopting this wholly unnecessary piece of legislation after the UK leaves in 2021?”

While Beale, Cox and other important stakeholders have lobbied the UK Government, the current negotiations with the EU — coupled with the Covid-19 crisis — mean that access to influential members of government and parliamentarians has been limited.

“Some of the changes that will occur in 2021 are unavoidable; however, I believe there is still a chance we can get the UK executive to rescind the VI-1 import requirement,” says Beale. He thinks it’s mainly an issue of time, because the Government has bigger priorities at present, which means getting access to politicians is difficult. “But I’m convinced that if we can make the case successfully, the Government will heed our warning.”

Unfortunately, as Beale understands, time is against him, and he knows that the chance of overturning the VI-1 is r “50:50”. But what happens if his lobbying is unsuccessful?

“The consequences for the fine wine trade and EU exporters could be catastrophic,” he says.

“Businesses such as fine wine platform Liv-Ex may have to relocate and base themselves inside the EU. At a time of global crisis, additional — and unnecessary — job losses are the last thing people want to think about.”