This month has seen another seismic political shock in the UK with the surprise downfall of the Tories leading to a hung parliament following the General Election on 8 June.
The newly instated hung parliament and the rise of Jeremy Corbyn’s Labour agenda has thrown Brexit even harder into the spotlight. Talks are due to start later this month, although what will be on the agenda is anyone’s guess at this stage. While the results may help those who want to stay close to the EU, they lend yet more uncertainty to trade and the economy. Inevitably this will have an effect, as wine prices continue to be affected by plummeting sterling.
Will Brexit trade terms be more open?
It’s too soon to tell, but the election results could very well open up the Brexit terms that the UK will put to the EU. And this could significantly impact the flow of wine trade between the UK and Europe.
An enormous 90 per cent of Britain’s wine is imported, and around 55 per cent of that comes from the EU, according to trade figures. Negotiations look like they may be somewhat delayed following the General Election, but they will start sooner rather than later.
Pre-election, Prime Minister Theresa May was gunning clearly for a ‘hard’ Brexit, which refers to her intention to pull the UK from the single market and the customs union. This option isn’t popular with people in many industries.
Labour policy to retain access to single market
Labour’s not inconsiderable gains in the election should strengthen the position of politicians favouring a softer Brexit, which will mean retaining and improving close trading ties with Europe. The opposition’s manifesto clearly stated that their negotiating terms would be different, and more inclusive, than the Prime Minister’s.
This is a view welcomed by the Wine & Spirit Trade Association (WSTA). Miles Beale, CEO of the WSTA said (before the election): “The WSTA will be working tirelessly to achieve our key aims: continued, tariff-free movement of wines and spirits to and from the EU; new, tariff-free trade agreements with priority countries outside the EU; and, equally, safe passage of our goods – with no additional checks or delays at borders, even once we have left the Customs Union.”
Weak sterling raises wine prices
UK wine buyers were already dealing with up to a 15 per cent price rise for Bordeaux 2016 en primeur due to the pound being weak against the euro. Sterling dipped again as the election results were announced on 9 June and hit a new low of 1.13. This is just added pressure for wine merchants and buyers when it comes to the Bordeaux 2016 vintage.
The wine trade, among many others, are definitely feeling the pressures of the economic uncertainty. The pound has already been weak against the euro for more than a year, and there are no signs of its recovery for the rest of 2017.
Average prices of wine have already hit an all-time high at £5.56 per bottle, according to figures from the WSTA.