Frieze London, 2015. Photo by Benjamin Westoby for Artsy.
Almost six months after Britain voted to leave the European Union, little light has been shed on Brexit’s potential long-term impact on the art market. To add to the confusion, there is now the threat of a legal battle over whether the U.K. will stay inside the EU single market after Brexit. The Supreme Court is to decide over the Christmas break whether Prime Minister Theresa May has the authority to trigger Article 50 without a parliamentary vote.
Until now, London’s art trade has taken Brexit in its stride. The consensus after the post-war and contemporary auctions in October was that foreigners were incentivized to bid as the pound slumped to a 31-year low, with some dealers citing discounts of up to 25%. Meanwhile, gallerists including Almine Rech and Thaddaeus Ropac appear innocuous to the persisting uncertainty and have recently opened–or are soon to open–new galleries in the U.K. capital.
Dealers are even remaining stalwart in the face of recent reports that leading banks are laying the groundwork to leave London for Paris, Dublin, or Frankfurt. “Banks will leave London purely because they need unconditional access to the EU, but for galleries and the art market it’s about where the collectors are and London will still be that place after Brexit,” says the Zürich dealer Peter Kilchmann. “The other great advantage to London is that English is the lingua franca of the world.”
But other art professionals warn that a more complex system of tariffs and duties could be introduced after Brexit, depending on the level of access the U.K. has to the single market. The London-based art lawyer Pierre Valentin says that moving art from the U.K. to the EU could trigger import VAT when it enters Europe. For example, France currently an import VAT of 5.5%. Conversely, art being transported from the EU to the U.K. could be subject to 5% import VAT.
“If VAT privileges currently available to U.K. dealers are removed, this may impact their cash flow and their appetite to participate in EU art fairs,” Valentin says. “The amount of paperwork is likely to increase considerably, not to mention the need to adjust IT systems, which could absorb a great deal of time.”
To minimize disruption, Valentin says the big auction houses may decide to move some of their London sales to continental cities. However, Christie’s and Sotheby’s both say they have no plans to relocate any part of their businesses. “Once the political process becomes clearer, we will align our business and operations with any new legislative framework,” a Christie’s spokeswoman says, noting that a growing pool of international bidders in the second half of 2016 has injected “confidence in the long-term outlook for the art market.”
Exterior view of Almine Rech’s new Mayfair space. Photo courtesy of the gallery.
Other art trade insiders argue that Brexit could be an opportunity for the U.K. to abolish import VAT on art altogether. “In reality the tax produces very little revenue because so many of the artworks entering the U.K. are imported on a temporary basis,” says the European Old Masters specialist Guy Stair Sainty. The London-based dealer says ending import VAT and leaving the single market would be a “huge incentive” for dealers to relocate as a point of access to the art market in the U.K., Switzerland, Russia, Turkey, the Middle East, China, and Japan. “It will also enormously strengthen our ability to compete with New York,” he says.
In a recent opinion piece for The Telegraph, Anthony Browne, the chairman of the British Art Market Federation, says the art market has so far weathered Brexit because most business is done outside of the EU. “While the EU is the main trading partner for many other sectors of the U.K. economy, 85% of the £4 billion worth of art imported to the U.K. last year came from non-EU countries, and only 2% of all art exports went to EU destinations,” he says.
Opinion may be divided over the effects of Brexit on the market, but the support for London is unequivocal from all quarters. “For many people London is the greatest city on earth. Its history, international diversity and culture is only rivaled by New York,” says Nick Hackworth, the director of Modern Forms, a London-based private collection. “Those qualities have survived far worse threats than Brexit and they will continue to attract the wealthy, passionate collectors that sustain the commercial art world.”