Every industry is grappling with its own set of concerns about the Brexit effect. It may have been a coincidence, but on Valentine’s Day and shortly after January’s driest month, the industry group urged us to consider the stability of the British wine trade.
ThereThere were strong warnings that a “triple-whammy” would hit the UK’s imported wine industry: the declining pound and signs of increasing inflation. There was also the possibility that the UK chancellor could raise alcohol duty in his next budget. The situation sounded as if it was a perfect storm that would cause concern for wine lovers who are on a budget. The price of a glass of wine could soon increase dramatically.
Where does our money go if we buy a wine bottle? Take an imported PS9 bottle as an example. The actual production and making of the wine only accounts for around 27% of the price. Nearly the same amount (22%) is spent on UK duties. The biggest portion (32%) is allocated to the operating margin of distributors and retailers, while 17% is VAT.
Are suggestions that a “triple-whammy” in price could be a real taste of the future, or is it just a PR stunt to gain attention? The only honest answer is that, at this time, we don’t know. You can always trust the best predictions of our experts, even if they could be described as “guesstimates.”
Remember the catastrophes that were to strike the UK should it vote to leave the EU. The International Monetary Fund warned of the “Brexit” recession and claimed, “Leaving the EU will hit British living standards and stoke up inflation.” None of these things has happened.
The rate of inflation is going to go up and down. It is a constant change, but it is usually only background noise to most people.
It is expected that the current rate of 1.8% will rise to 2.7% in early 2018. Many economists believe that this rate will peak at 2.9% in late 2018 and then fall back to 2.2% by 2020. Could this inflation increase the price of wine? We can only guess. In the short term, retailers and manufacturers may decide to wait, take the financial hit, and hope inflation will start to drop again. This would leave thirsty consumers uninformed (or even poorer).
Stocking up. Shutterstock
There is a consensus among economists that the economy will slow down. However, it won’t be as rapid as initially thought. A weaker exchange rate can bring in investment. This is all linked to the Brexit uncertainty, as there are fears that the flow of foreign investment could slow due to a weaker pound. The chancellor is likely to be closely monitoring these issues and could decide to freeze any increase in duty. The triple whammy, which was feared, would, therefore, be put on hold or even relegated to the past.
Add a cork to it.
Do we need to buy wine now? Wine supply is more stable than shortages that have affected other groceries, such as iceberg lettuce. Major supermarkets limit the number of iceberg lettuces per customer to three.
It would help if you also considered the risk you’re willing to take when filling your cellar. Consider this historical perspective on inflation: PS9 of today’s money would have been enough to buy two bottles of PS9 wine dating back to 1996. This is not a big change after 20 years of inflation. It is important to remember that while an increase in price may be possible, it makes for good news. When it comes to your wine stock, it may be better to do a stocktake before you buy more.
