British Dealers’ Biggest Fear for 2017 Confirmed by Prime Minister
When the United Kingdom voted to leave the European Union last summer, it sent journalists and pundits scrambling to figure out how this unprecedented departure would take shape. On Tuesday, as Prime Minister Theresa May delivered her much-anticipated speech to a crowd at London’s Lancaster House, details finally began to emerge—details that, as it turns out, directly contradict the wishes of many galleries operating against a backdrop of post-Brexit uncertainty.
The biggest takeaway from May’s speech was the complete rejection of the E.U.’s single market, which allows the free flow of goods, capital, services, and people between member states. “I want to be clear: What I am proposing cannot mean membership of the single market,” she declared in advocating for the so-called hard Brexit. “Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out.”
However, many British dealers believe that this free movement of goods is necessary for their businesses to be competitive in the global art market. According to London Art Fair—which released its annual survey of exhibiting galleries today in advance of its 2017 edition—49% stated that maintaining a free flow of people and goods within the E.U. is the single most important thing the U.K. government could do to maintain London’s current standing as a global art hub. The next greatest priority for galleries, a close second at 45%, is the continuation of reduced tax rates for artworks imported or exported from outside the U.K. or E.U., which are currently taxed at 5% and 0%, respectively.
“Whatever the outcome of the Brexit negotiations, it is important that London maintains its competitiveness as a global art hub—whether through providing the right conditions for import and export of goods or ensuring free movement of talented people who work in the sector,” said Sarah Monk, director of London Art Fair.
Zavier Ellis of Charlie Smith London agreed: “There might be hesitancy in the market while Brexit is resolved, but there are still people who want to collect and buy good art. There is certainly no hesitancy from the U.S. and with a weakened currency we’re in a good position to be exporting.” Ellis continued, “We would want the government to retain free movement of goods in the E.U. and it is imperative to avoid extra tariffs, tax liabilities, and administration.”
Following a break with the E.U., May promised this week that Britain will pursue “the greatest possible access to [the single market] through a new, comprehensive, bold and ambitious free trade agreement.” As to what this framework might look like in practice, May noted that certain areas may incorporate “elements of current single market arrangements”—such as London maintaining its ability to offer financial services across national borders, since it “makes no sense to start again from scratch.”
Despite the Prime Minister’s bold stance, there are still several hurdles to go before the U.K. can make a clean break with the E.U. Firstly, the Supreme Court will rule later this month to determine whether the Parliament must vote on Article 50—a provision of the Lisbon Treaty that lays out the process for withdrawal and must be formally triggered before any official negotiations can begin. Additionally, in her speech, May confirmed that both houses of Parliament would vote on the final Brexit deal, which is expected to be finalized by early 2019. However, there’s no clear picture of what will happen should the Parliament reject either option—which would certainly ensure a messier separation than May has described.
For their part, British dealers and galleries are still waiting for the effects of Brexit to set in. “In the short term Brexit hasn’t made much of a difference to the global art market,” said Matthew Travers, director of London gallery Piano Nobile. “2016 was a good year for Modern British sales, helped by interest in private collections such as David Bowie, and the market remains buoyant.”
What was then a 31-year low for the pound encouraged foreign buyers to bid during October’s post-war and contemporary auctions in London; at Frieze London that same month, despite an air of uncertainty clouding the proceedings, serious collectors were still buying. The October slump of the pound was brought on by initial comments by the Prime Minister indicating a hard Brexit. Sterling hit a new low against the dollar on Monday, ahead of May’s speech, but rebounded on Tuesday during her actual remarks.
But galleries are wary of changes to come. As the London Art Fair survey reveals, nearly 60% of the 51 respondents think the British economy will fare worse in 2017. And while they are marginally more optimistic about the art market in particular, 47% still believe that it will decline this year. Only 14% were confident that the art market would improve in 2017.
“London is an international hub of the art world and the government should not jeopardise that,” Travers warns. “The concern is a loss of market share to other global cities—we need to make sure that the U.K. remains highly competitive.”
Hong Kong Art Week
Sponsored by Hong Kong Art Week