The Brexit debate recently caught the attention of the art world when the Vote Leave Campaign “unlawfully” projected their slogan onto Antony Gormley’s iconic Angel of the North. But what consequences might a British exit from the EU have for the art world?
EU funding for the arts
EU funding for the arts runs to millions of pounds a year and provides “large chunks of research and project funding” for UK museums, which “could not [be] replicate[d]” by individual member states. EU funding has contributed to projects such as the Imperial War Museum North in Salford, the new Richard III heritage centre and tomb in Leicester Cathedral, as well as the cost of Gormley’s Angel of the North (something the Vote Leave campaign presumably did not realise). If EU funding were lost, alternative funding would have to be found from the UK government or elsewhere. Brexit supporters would likely respond to this by pointing to the money which arguably might be saved by leaving the EU, although there is no guarantee that this would be spent on the arts especially in the current climate of cuts to cultural funding.
EU funding for the cost of maintaining Europe’s cultural heritage, particularly in southern Europe, is another issue. EU supporters argue that the UK should share responsibility for this if we wish to continue to share “the glittering artistic heritage of continental Europe.”
Aside from funding, EU membership has led to new regulations in the UK art market, including the Artist’s Resale Right, export licensing and VAT import tax, which are more controversial and are considered in turn below.
Artist’s Resale Right
The Artist’s Resale Right (ARR) was implemented in the UK in 2006 and entitles creators of original works of art (including paintings, engravings, sculpture and ceramics) to a royalty each time one of their works is resold through an auction house, gallery or dealer for more than €1,000. From 1 January 2012, ARR was extended in the UK to cover sales of work by deceased qualifying artists still in copyright (which lasts for the lifetime of the artist plus 70 years after his/her death), with the artist’s heirs being eligible for the royalties. ARR is levied at 4% on sale prices between €1,000 and €50,000, with a sliding scale that reduces to 0.25% on prices of more than €500,000.
Supporters of ARR describe it as the most significant new right for visual artists in recent times, giving them an ongoing stake in the value of their work, and praise the EU for harmonising a law that existed elsewhere for many years.
Critics, however, argue that ARR put the UK, and London in particular, at an immediate disadvantage to its key competitors New York and Hong Kong, neither of which levy ARR on art sales – or as one commentator put it, “if you have a really expensive Picasso, you will sell it in New York” (Antiques Trade Gazette, 13 February 2016). The Spectator quotes a 2014 report which shows that the UK’s global art market share in post-war and contemporary (the sector most affected by ARR) fell from 35% in 2008 to 15% in 2013. At the same time the UK’s global share of sales of the work of living artists fell from 37% in 2008 to 16% in 2013. ARR is not the only factor, however; the relative economic performances of Europe and the US, and therefore the relatively greater buying power of US collectors, are also significant. Nonetheless, ARR has seemingly had a major impact.
While those in the art trade may wish to renegotiate ARR were Britain to leave the EU in order for the UK to compete with New York and Hong Kong, artists themselves are likely to oppose changes to ARR that would see their royalties reduced.
Export licences made headlines last week when the British government demanded the return of Joan of Arc’s ring, which was bought at auction in London by the Puy du Fou Foundation in France, on the basis that it had been exported without the relevant licence.
The current export licence regime was introduced in 1993 by an EU Regulation requiring licences when cultural goods exceeding the relevant EU ‘threshold value’ are exported outside the EU.
Supporters of export licenses argue that they strike a balance between the protection of national treasures and their retention in the UK and EU, the rights of owners, and the preservation of the position and reputation of the UK as an international art market. Export licences can be used to stop works deemed of national importance from being exported by allowing museums to purchase them at the same price they have been sold for. A diverse range of artworks and other items have been saved for the nation in this way including Jane Austen’s ring and a self-portrait by Sir Anthony Van Dyck which now hangs in the National Gallery.
Critics argue that export licences add a further administrative burden to international sales when compared with competitor markets.
Again, however, it is unclear if Britain was to leave the EU, whether and how the export licensing system might change, as it has widespread support and may even be strengthened.
Until the mid-1990s, most art could be imported to the UK without import tax being charged. In the mid-1990s, import tax was introduced on works imported from outside the EU and is charged at different rates in different countries. There is a temporary import scheme which allows import VAT to be waived if a work is re-exported within two years, something that was vital for the London market.
The UK, which has the lowest rate of import VAT at 5%, is often the preferred destination for importing works to the EU (Italy, for example, is a less attractive option with 22% VAT). However there is some speculation that if the UK remains in the EU and import tariffs are regulated into one flat rate, the UK would lose this advantage, and works would be sold elsewhere (Antiques Trade Gazette, 13 February 2016).
Critics of the VAT import tax point to the fact it was opposed by the British government before it was introduced, and its effect has been to create an additional administrative burden on art businesses and a disincentive to import to the UK and EU. In addition, when British dealers sell works to Europe, they can no longer claim back VAT (at 20%), so end up out of pocket.
It is unclear, however, if Britain was to leave the EU, whether and how the VAT import tax might be amended. EU supporters argue that any country wishing to trade with the EU without large tariff barriers would have to abide by EU rules, and point to the fact that Norway and Switzerland have to apply very similar rules, but are unable to influence them.
Anti-money laundering regulations
Anti-money laundering regulations also derive from the EU and include an auction house’s obligation to check the identity of bidders and the source of their funds prior to an auction. While some see these as more red tape, these requirements are likely to remain even if Britain were to leave the EU, due to the need to adhere to certain global standards and maintain the UK’s reputation.
So would Britain’s exit from the EU be likely to help or hinder the art market?
It is clear from the above that while critics point to the administrative burdens of EU regulation and their negative impact on the art market, it is unclear whether and how these might change if Britain were to leave the EU. Commentators speculate that it could take as long as two years to leave the EU and up to ten years to renegotiate all the deals necessary to trade with Europe, which means years of uncertainty, impacting on the market. Indeed, commentators argue that the general economic health of art buyers, both in the UK and abroad, has a much greater impact than other factors on the prosperity of the art market.
As well as regulations, there are wider issues such as EU funding, which could leave a large hole in museums’ budgets and other creative projects. Leaving the EU may have other consequences, such as foreign governments being less ready to assist with the recovery of art and a decline in European buyers in the London market due to added transactional costs.
By staying in the EU, Britain has the ability to influence the negotiation of existing and future regulations and other issues which affect the UK art market, although this has not always proved the case for the City of London. While some argue that the UK art market has little negotiating power, others estimate that the art market is larger than the music industry, but needs to come together with one voice in order to make a difference, whether Britain stays or leaves the EU. If Britain does vote to leave the EU, then the art market will need to ensure that its voice is heard in the context of any reforms.
Becky Shaw is a solicitor at Boodle Hatfield LLP and a member of its dedicated art law team.
References and further reading
‘Round table on Brexit’, Antiques Trade Gazette, 13 February 2016.