What does the UK’s exit from the EU mean for the beverage business? First of all, don’t panic! The negotiations for the change will take considerable time, with predictions in the 2-3 year range. There are also many variables that will be discussed in the process, and one possibility is that the UK could remain in a duty free zone with the EU. Below see the article published in The Drinks Business earlier today.
Drinks Trade Reacts To UK’s Decision To Leave EU
By Lauren Eads
June 24, 2016
As the UK wakes up to the news that it will be leaving the European Union, the drinks trade has reacted with calm determination, despite many key figures having publicly thrown their support behind the remain campaign.
The leave campaign clinched the vote by 51.9% to remain 48.1%, prompting the swift resignation of David Cameron as Prime Minster and causing the value of the pound to plummet.
Yesterday, prior to the vote, Majestic boss Rowan Gormley warned that exiting the EU could cause the price of wine, along with all imported goods into the UK, to increase.
“If a Brexit does happen and that results in the sustained fall in value of the pound, all imported products will have to go up in cost over time and wine will be no exception to that,” Gormley said. While all UK retailers are likely to be effected equally, putting all on a level playing field, Gormley said higher prices would not help the market to grow.
Price of wine “likely” to rise
Jay Wright, CEO of Virgin Wines, has also predicted that the price of wine is “likely” to rise, stating this morning that the “EU won’t feel as strong without the UK”.
Both the WSTA and Scotch Whisky Association had also campaigned in support of remaining inside the European Union. Following a survey of the WSTA’s 300 members, 90% said they wanted to remain in the EU, with just 2% backing ‘Brexit’ and 8%, at that time, undecided.
The Scotch Whisky Association’ (SWA) David Frost meanwhile said that leaving the EU could put the industry’s £1 billion pounds worth of exports and the 40,000 jobs that it supports at risk, stating that British producers were likely to face bureaucratic barriers when trading with Europe if they left the union.
This morning, Frost reacted with determination stating that there were now “serious issues to resolve” but that “all must now get behind the government as it faces the challenges, and the opportunities, this decision brings”.
Similarly, Miles Beale, chief executive of the WSTA, had raised concerns about a Brexit prior to this morning’s result, previously stating that it could stunt the growth of the UK’s burgeoning gin industry.
This morning Beale said the WSTA would do “everything it can to ensure that the UK’s wine and spirit industry has a powerful voice”, within the European and international market.
Pound at same level now as in March
Within the world of fine wine, a spike in investment was seen overnight, according to Justin Gibbs, co-director at Liv-ex.
“Overnight, when the pound got slaughtered, we saw a surge in dollar and euro based buyers”, he told the drinks business, adding: “this morning a rather lovely calm has emerged. It feels like business as usual”.
He also said that the bid to offer ratio on Liv-ex had been declining in the run up to the referendum dipping below 1, but that this morning, on the back of the night’s trade, it had climbed back up to 1.5 and was still going.
In terms of currency Gibbs made the point that the pound was now at the same level as it was in March.
“It feels dramatic, but merchants, traders and everyone has been through currency volatility before and they get on with it”, said Gibbs. “The concern now is what happens to the Euro”.
Diageo, the world’s largest maker of Scotch whisky, had also expressed support for the European Union with its chief executive, Ivan Menezes, stating his belief that the “EU’s clout in international trade helps to open up new markets with agreements favourable to the UK, reducing tariffs and resolving trade disputes”.
One of the few figures within the trade to publicly back the leave campaign was Tim Martin, the founder of UK pub chain Wetherspoon, who this morning said the decision would “enhance freedom and security” and that anxiety over the economic effects of independence during the campaign had been “misplaced”.
“The UK will thrive as an independent country, making its own laws, and we will work with our good friends and neighbours in Europe and elsewhere to ensure a positive outcome for all parties”, he said.
As the UK grapples to make sense of the historic upheaval such a leave vote is likely to bring, the drinks trade has shared its views on the result.