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  1. Wealth
February 16, 2017

London art market: Brexit nightmare on Cork Street?

By Olenka Hamilton

Does Brexit spell doom for London’s £10.8 billion art market, asks Olenka Hamilton

A week after the UK voted to leave the EU, while a firestorm struck London’s stock market, its auction houses breathed a sigh of relief. The Christie’s British art sale had been an unexpected triumph, with eleven records and bidders from 32 different countries. Brexit hasn’t changed a thing, they said: Britain’s £10.8 billion art market – the world’s second biggest after America and the product of 300 years of hard work and tradition– is safe.

Or so they thought. For Theresa May’s intention to withdraw Britain from the EU Single Market and customs union is making some in the industry anxious. While under the current tariff-free EU system, you can take your Titian from London to Paris for free, come hard-Brexit, you may find yourself paying import tax. (The tax varies according to each EU member state and is set lowest in the UK at 5 per cent, followed by France at 5.5 per cent.) The fear is that people will simply take their business elsewhere – to Paris, Berlin or Brussels – to avoid the extra costs, which if you’re paying £22 million for a Henry Moore sculpture plus postage and packaging, are not to be sniffed at.

It goes without saying that the import VAT would increase the cost for dealers and as a result reduce auction houses’ ability to attract consignments from Europe. ‘The real fear among UK art dealers and auctioneers is a gradual decline of competitiveness,’ warns British art dealer and art historian Bendor Grosvenor.

Whether or not Mrs May’s government negotiates better trade terms on behalf of Britain’s art market is unknown but some, like Grosvenor, fear the UK Treasury, which is currently grappling with £1.6 trillion worth of national debt, will be unable to find the cash to warrant scrapping the tax. Of equal concern is that the EU, adamant that the UK should not get off lightly in Brexit negotiations, will be just as unwilling to negotiate a waiver.

Fortunately it’s not all doom and gloom: step forward eminent art dealer, historian and art world giant Philip Mould, who sees Brexit as an opportunity. It is a chance to finally scrap the controversial Artists’ Resale Right (ARR), an EU regulation brought in in 2006 which is essentially a royalty that’s paid to an artist each time a work is resold during his or her lifetime and to their heirs for 70 years after their death. As it does not apply in the USA, Switzerland, Hong Kong or any of the other global art market players, it has made Britain uncompetitive. ‘There is a disparity of opportunity between US and UK markets,’ fumes Mould.

ARR caused the UK’s global art market share in post-war and contemporary (the sector most affected by ARR) to fall from 35 per cent in 2008 to 15 per cent in 2013, according to a 2014 report by Dr Clare McAndrew of Art Economics. So dropping ARR could make a real difference.

Keen for the opportunity to revise the regulation, Mould is confident the government understands the need to waive import VAT, which would be punitive nonetheless. Britain’s position does not need to change but should rather improve, he says, providing there is sensitivity in relation to an unfair loading of VAT. ‘It would be an extremely insensitive administration that didn’t see the broader cultural and economic advantages of caring for a position that has evolved over 300 years.’

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Let’s just hope he’s right and Mrs May agrees.

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