Ever since the British referendum of June 23, 2016 and its subsequent vote to leave the European Union, art institutions and galleries across Britain and the EU member states have been operating in a climate of confusion. At the present time, months following the first “divorce date” of March 29 and months before the newly proposed one of October 31, there is still no withdrawal deal that could realistically dictate the future relationship between the two sides. Here at Convelio, we are assessing the impact of Brexit on the art world as well as preparing logistics contingency plans for a “no-deal” scenario.
By its very nature, art is mobile, durable and portable. The art marketplace is inherently international, relying heavily on the ease of movement of its people and assets, which go to benefit the economies and societies of the countries involved. Britain has been particularly successful at expanding the cultural, economic and social power of its art world. The 2019 Art Market report by UBS and ArtBasel states that the UK has retained its position as the second-largest art market with 21% of global sales by value. Even despite the uncertainties of Brexit, it is still a big fish in the small pond of the international art market - just think of all the world-renowned museums, galleries, art fairs, artists, exhibitions and auction houses based there. In relation to the EU, Britain takes up 66% of the EU art market share.
Art market -
1- Regulatory framework
Experts claim that the success of the British and American art market is partly due to their model of low regulation, freedom of competition, and strong private property rights. Vendors and buyers alike tend to gravitate towards these key market hubs, using regulatory arbitrage to access the best sales terms in the global art market. Although the ramifications of future terms of trade between Britain and the EU27 are still unknown, Brexit may provide Britain with an impetus for regulatory review and change that could push its competitive edge further.
Britain may wish to use its newfound freedom to modify elements of its legislative framework that had been previously dictated by the EU, such as intellectual property, copyright, cultural property regulations, Artist’s Resale Right or import licenses. An example of this would be the UK’s VAT system which, post-Brexit, will no longer be bound by top-down art market-related EU directives. Although the UK currently has the lowest rate allowable by EU VAT rules, with its an import value-added tax (VAT) rate set at 5%, it does not compare favourably to its global competitors: the US (0%) and China (3%).
The prospect of Britain modifying or eliminating EU directives related to the art market has delighted many, including Dirk Boll, president of Christie’s Europe, Middle East, Russia and India, who has reiterated that Christie’s does not intend to change its European operations: “We still think London is the best marketplace,” he said, “And not having any import tax would help”. The very same notion has alarmed art dealers on the continent; in an open letter written by members of the trade federation Conseil National du Marché de l’Art (CNMA) major figureheads including dealers, auctioneers and specialists called on the French government to implement changes that could help counter the competitive threat posed by a deregulated British art market.
However, the opportunities presented by Brexit are not so clear-cut. Some are considering the isolationist element of Brexit and choosing to open galleries in the continent that will still retain a strong European identity. When German-born David Zwirner announced the opening of his Paris space to the Financial Times, he stressed this strongly: “Brexit changes the game. After October, my London gallery will be a British gallery, not a European one. I am European and I would like a European gallery, too”. With the French import rate set at 5.5%, it seems likely that France will soon become the global entry point to the European art market, thus pushing other gallerists and dealers to follow Zwirner’s example.
2- A question of Logistics
Whilst there are certainly different Brexit strategies being undertaken by the various members of the art world, there is one thing that everyone can agree on: preparation. It is critical that the art world be prepared for every scenario, including the worst-case scenario of a “no-deal” Brexit. In terms of art logistics, the main concern is obviously the loss of Britain’s intra-community trading status. After Brexit, Britain will no longer be able to benefit from the free movement of goods (and people) between the EU member states, which previously allowed dealers to avoid customs clearance procedures as well as import duties and taxes for artwork border-crossing.
The implications for customs will depend on the details of the agreement and whether there are hard or soft borders in place. In case of a “no-deal” Brexit, all shipments to and from the EU will require customs clearance from two different authorities, which will inevitably lead to extra administration, more paperwork, higher costs, and delays.
In terms of exports from the UK, the licenses are not likely to be affected by a “no-deal” Brexit. It would likely be the case that the present system of exporting cultural property items to a non-EU country will simply be extended to include EU member states, and that the Arts Council England will continue administering this licensing system. Instead, since there are no procedures or licensing agreements in place for imports from the EU to the UK, dealers will need to comply with the EU and individual EU countries’ export licensing regimes.
The administrative burden of added border controls and customs formalities will reduce access across the straits at Dover and Folkestone ports for up to six months. Many art world players have already begun anticipating delays; London dealer Kate MacGarry chose to import pieces that will be exhibited at Frieze London in October several months in advance. Similarly, when the deadline was expected to be 29 March, Tornabuoni Arte closed one of its shows two weeks ahead of schedule in order to avoid a hefty reimport bill - the 40 artworks in the show had a value of 70 million euros which, with Italy’s 10% import rate, would have cost them a tax bill of 7 million euros!
Relatedly, there is the issue of temporary export rules. It is currently the case in EU legislation that works imported temporarily for events, such as the Frieze or Masterpiece art fairs, are exempt from import duties and VAT. Since they are freely circulating within the customs union, EU exhibitors do not have to pay anything to bring works temporarily into the UK, and vice versa for UK exhibitors. According to the Museums Association (MA), when the UK will sit outside of this zone post-Brexit, these economic implications may unfortunately lead some museums to not borrow to or from others (it remains to be seen whether the recently proposed free port initiative will be implemented post-Brexit). Similarly, the sale and transport of CITES-related items will likely diminish due to the fact that they will no longer be allowed to pass through Dover or the Euro tunnel, and will instead only travel through designated ports with a special permit.
Conclusion - Contingency plan
As we get nearer to the deadline, contingency plans will have to be developed and preparations will have to be accelerated. This should not be a problem, since it is in art’s nature to be responsive to the socio-political issues of its time. This will not be a problem for Convelio either - with offices on both sides of the Channel in London and Paris, we will be ideally suited to help galleries that have offices in various locations. We will be there to ensure that the correct and updated documentation is in place before exporting, and with our multiple departure options around Europe we will also be able to improve transport times and avoid the highly saturated Dover-Calais route. Our mission of servicing dealers, artists, collectors, designers and galleries worldwide with our high-quality logistics solution will continue regardless of the outcome of the Brexit negotiations.