Brexit steals some of Britain’s Christmas cheer

Angela Charlton and Danica Kirka
Associated Press

Villevenard, France – Frederic Berthelot has 20 acres of vines on the slopes above this tiny village in France’s Champagne region, his vineyard distinguishable from others in the area by the tiny rose bushes planted at the base of each vine.

The roses are a bellwether for parasites. But as Britain and the European Union crawl through a protracted divorce, Berthelot has more to worry about than bugs. His century-old business decided to start exporting to Britain for the first time just as the country voted to leave the EU. The pound immediately plunged, making imported wine more expensive in Britain. Eighteen months later, Berthelot and his British trading partner are still waiting to find out what rules will govern future trade.

“We are in a period of transition, of uncertainty,” he said.

While British and EU officials last week trumpeted their success in reaching a deal on preliminary Brexit issues such as the rights of citizens in each other’s territories and the status of Britain’s physical border with the Republic of Ireland, the future relationship between the two sides remains in limbo. Even if European leaders authorize the start of trade talks during a meeting this week in Brussels, it may be another year before any concrete decisions are reached.

That is likely to take a toll on economic growth — and jobs — because businesses will delay investment as they wait to see what the final deal looks like, said Jeffrey Bergstrand, an expert on international trade at the University of Notre Dame in Indiana.

“It creates uncertainty about the direction of economic activity,” he said. “The uncertainty creates waiting, and waiting creates a negative impact.”

Britain’s economy has already slowed markedly this year amid the Brexit uncertainty. At the start of the year, it was the fastest-growing economy in the Group of Seven industrialized democracies. Now it is the slowest.

A study by the U.S.-based RAND Corp. suggests the U.K. economy is likely to suffer under the most likely Brexit scenarios. If Britain were to leave without a deal, forcing trade to be conducted under generic World Trade Organization rules, the country’s economic output in 2029 would be about 5 percent lower than if Britain had stayed in the bloc, the study found. Wine drinkers are among the first to feel the effects.

The drop in the value of the pound has made wine more expensive in Britain. In addition, consumers are likely to cut back on luxury spending as rising inflation reduces disposable income and the steady drumbeat of negative Brexit news makes people more cautious, said Jonny Forsyth of Mintel, an international market research firm.

“It’s not good news for alcohol. Full stop,” Forsyth said.

That’s bad news for winemakers because Britain is the world’s fourth-biggest wine consumer, behind the United States, Germany and France. Retail sales of wine in the U.K. reached almost 1.1 billion liters last year, the vast majority of it imported.

It’s potentially even tougher for old world winemakers like Berthelot — small business owners who face competition from New World brands that can be cheaper and who deploy marketing strategies to entice consumers confused by the “wall of wine” encountered at grocery stores.

That advertising taps into Britain’s longtime love affair with Champagne, the favorite drink of Winston Churchill, who was a fan of Pol Roger, made in the famed Champagne town of Epernay. And at this time of year Britons, who often repress their admiration for all things French, love to put this little luxury on their Christmas tables.

Berthelot recently opened a new horizon for his business, partnering with London-based entrepreneur Richard Ellison to export his champagne to Britain for the first time, despite the specter of Brexit.

Although shipments have been disappointing, Berthelot is playing the long game from this village of 220.

But they agree on one thing: whatever havoc Brexit might cause now, the British will always drink Champagne.