Post-Brexit, What Does Art Dealing in the UK Look Like?

Collectors' Tip, Art Market

February 9, 2021

On January 2021, the long-talked Brexit finally became reality. As the free movement of people and goods and services between the UK and the EU ended, this will bring significant differences to how people live, work and travel. The problems this scenario would cause for the art market have already been much talked about, from issues with funding and export licenses to costs of the artworks trading and the problems that would emerge due to the new visa regime.

Although the UK left the EU in January 2020, it followed EU rules until a new trade agreement negotiated with the bloc came into effect on January 1st. The art sector, among others, is now discovering trade is not quite as free as they had hoped. While some are worried that new taxes, fees and red tape will have them go out of business, others see opportunities as the market readjusts. How will art dealing in the UK post-Brexit look like?

The Issue With the VAT Payments

According to the 2020 Art Basel and UBS Art Market Report, Britain was the world’s No. 2 market for art and antiques in 2019 after the United States, with $12.7 billion of sales — 20% of the total global market. Yet, the report pointed out that, given the uncertainties of Brexit, Britain’s market declined 9 percent in 2019, while sales in France, Europe’s next biggest market, grew 7 percent.

The administrative, tax, shipment and timing costs for doing business in the U.K. have now increased. Before the new trade agreement, the UK's value-added sales taxes were among the lowest in Europe and in many cases not applied at all. Now, if the EU customer is to act as importer, they will be responsible for the import VAT due in the EU country of import, facing bills varying between 5.5 percent (France) and 25 percent (Denmark) on art or collectibles imported from Britain. This could significantly impact the robust auction and fair sectors. This creates an opportunity for the markets like France to become more appealing for business than the UK. Even before January 1st, many international buyers quietly moved their collections to avoid VAT payments.

The End of the Free Circulation

A post-Brexit UK also means that free circulation no longer exists, resulting in a lot more paperwork. Import duties for UK/EU trade are now required, adding a series of new to-dos such as customs declarations and documentation.

Shippers have already reported delays at the border, as they face "teething problems" transporting works to Europe after Brexit. The key issues are additional costs, administration and time. According to some reports, up to 20% of parcels going to the EU currently have incorrect or incomplete data attached and are being returned, resulting in costly delays or even affecting deals materializing. Some of the gallerists report that there are many administration processes that haven’t been communicated very coherently, including the new EORI number with and EU prefix that is needed to continue European operations. Among the good news, the value threshold for works that require export licenses to leave the UK has increased - from £132,000 to £180,000 for paintings; and for other works, including drawings and sculptures, it is now £65,000.

The online sale is also being affected, as e-commerce providers based in the UK now might need to adhere to other countries' rules with respect to privacy, data collection, return policies, or disclosures. At the same time, the costs of shipping have increased significantly, affecting the transportation of lower-value items the most.

The other considerable problem has been with air freight, as many found that their status as regulated agents, meaning that any works they collect from its warehouses can be accepted by airlines for secure air cargo for air freight, has not been recognized by airlines. This led to increased screening checks, and most importantly, sometimes the opening of cargo by officials without art-handling experience. Apart from the risk of damage to the shipments of very high value, this can also cause delays. All of these issues have led many to decide not to ship until the teething problems have been resolved.

While some fear that the collaboration among museums will become more difficult, affecting the transportation of artworks across the border, the temporary admissions procedure still applies, meaning works can be temporarily imported for exhibitions and art fairs.

Another thing that hasn't changed is that EU laws in relation to Artists’ Resale Rights and Anti-Money Laundering will remain enshrined in UK law. The agreement even seeks to strengthen these actions also remain as law, and the EU and UK have both committed to regulations relating to endangered flora and fauna by restricting their trade in line with the Convention on International Trade in Endangered Species of Wild Flora and Fauna of 1973

As is the case with goods, the free movement also used to apply people. As visas are now necessary, it will be more difficult for artists to travel for residencies and education. It will bring increased costs to international exchanges in the arts world, which also includes recruiting staff from Europe such as museum directors, curators, and other expert employees.

The New Brexit Deal as an Opportunity for Art

While many fear the increase in costs that the new trade deal would brings, some dealers and collectors in European Union countries with high taxes on the art trade, like Germany, see Brexit as an opportunity. This means that art bought in Germany could be imported to Britain relatively cheaply and that pieces bought in Britain would be subject to import VAT of 7 percent, whereas Germany charged 19 percent on domestic transactions. In this way, the UK could retain its importance within the European and global landscape as a major cultural hub.

Although all of the above mentioned issues seem overwhelming to deal at this very moment, many also agree that has not turned out quite as badly as many feared. It will take some time to grasp the clearer implications on the arts nation's art sector, but also if the country has the ability to achieve any legal or regulatory changes that could help the art sector. Whatever happens, businesses will need to adapt.

Featured image via pixabay.com.