As Philip Hammond, the British Chancellor of the Exchequer laid out his last budget before the UK officially triggers article 50 and sets off its seemingly unstoppable departure from the EU, a multinational giant offered a vivid illustration of the way Brexit is already affecting its business. The long-expected IPO of Accolade Wines is to be put ‘on hold’.
John Haddock, CEO of Champ PE, the Australian private equity company that has owned Accolade since 2011, told the Australian Financial Review that the decision to postpone the offering was a consequence of the “changing landscape” of the British wine scene. Accolade’s New World brands such as Hardy’s, Echo Falls, Kumala and Mud House are heavily dependent on the UK, and more specifically, British supermarkets. Today, no one can predict how UK wine retailing will look in as little as a year.
Exporters to Britain who have already been hit by a 20% fall in the value of sterling since the Brexit referendum, today learned that Hammond is going to raise the already onerous taxes on wine by a further £0.10. By my calculations, this means that to hit the average retail price of £5.44, a bottle would have to leave a New World cellar at a price of no more than $1.40.
If rising taxes are a fact of life for anyone wanting to sell wine in the UK, the value of sterling over the next two years is anything but certain. Optimists will point at a strengthening of the currency in the hours following Hammond’s speech; others foresee stormy times as Britain begins to negotiate an EU ‘exit fee’. Brussels negotiators are said to expect payment of €50bn over four years. Headlines of pro-Brexit newspapers last week, however, proclaimed that “Britain will not have to pay a penny to leave the European Union” following the publication of a report to this effect by the Financial Affairs Sub-Committee of the House of Lords, the UK’s senior parliamentary chamber.
The uncertainty this creates for the UK wine trade is reflected in questions hanging over the long-term sustainability of the London Wine Trade Fair which will be held in May. An event that was once - when its name included the word ‘International’ - an important part of the global wine calendar, is now shrinking annually, as bigger corporate and generic exhibitors elect to spend their money elsewhere. For many observers, if the fair is to survive, it will need a complete rethink.
Despite the current turmoil, Britain remains one of the world’s largest and most influential wine markets. There is little likelihood that many producers will decide to turn their back on it. They may, however, have to reduce their aspirations for the volumes of wine they ship to the UK.