With a new plan for UK-EU relations post-Brexit announced earlier this month, art market pundits are looking afresh at the potential consequences for Britain’s share of the global art trade. According to some commentators, the forecast is ominous.
In June 2016, our art law specialists considered the possible longer-term impact of Brexit on the art market including on EU funding for the arts, Artist’s Resale Rights, Export Licenses and VAT import duty. One year later, art auction search engine Barnebys, dubbed ‘the Google of the art world’, has weighed in on the debate.
Currently, the UK sits just behind the USA and ahead of China in terms of volume of art sales with a 21% share of the global art market. However, this figure represents an almost 10% decline over the past year. To make matters worse, Barnebys Co-Founder, Pontus Silfverstolpe has warned Brexit policies may further jeopardise the UK’s position.
As Silfverstolpe points out, the UK currently enjoys numerous advantages which give it an edge over the competition:
1. It houses international auction houses such as Sotheby’s, Christie’s, Bonhams and Phillips as well as a host of major art galleries;
2. Many high net worth individuals and potential art buyers have first or second homes in London;
3. It is governed by business-friendly policies and is home to financial institutions, which assist with funding major art acquisitions; and
4. London legal and accounting firms are experienced at establishing arts and family trusts and helping to import and export art globally.
With Britain’s departure from the EU, Silfverstolpe suggests these advantages may come under strain:
1. VAT Import Duty
• When Britain leaves the Customs Union, we stand to lose the discounted rate of 5% at which we currently import artworks from outside the EU into the UK;
• The 5% rate is the lowest in the EU and if we lose it, UK based art dealers and auction houses also stand to lose the freedom from taxes, import duties and time-consuming paperwork that it currently enjoys as a member of the Customs Union;
• Yet as art law specialist and Boodle Hatfield partner, Tim Maxwell, highlighted in June 2016, this 5% rate can be a headache for many UK art dealers, galleries and auction houses; and
• Abolishing the charge may entice more international art market players to move to London from other EU countries.
2. Freedom of Movement
• The art market in the UK is energised by the freedom of movement of members of the art world;
• Many believe this freedom has secured the UK’s dominant position in the global art market;
• On the other hand, Chairman of the British Art Market Federation, Anthony Browne, believes Brexit presents an opportunity to strengthen the UK’s art market competitiveness by facilitating access to the biggest global art markets such as the USA, China and Switzerland and removing EU regulatory burdens.
3. Artist’s Resale Rights (ARR):
• Under the EU regime, London is a signatory to this tax, which is levied on the sale of works by living artists or artists who have passed away within the last 70 years;
• If the UK leaves the EU and drops this tax, it could lure more art buyers to London and away from art market hubs such as New York where no such levy applies;
• However, supporters of ARR laud it as the most significant new right for visual artists in recent times;
• Maxwell predicts Brexit will herald a renegotiation of ARR to better compete with New York and Hong Kong.
Perhaps then the outlook is not so gloomy in a post-Brexit art market, so long as stakeholders are prepared to roll up their sleeves and fight for the opportunities presented by this brave new world.