Review: What does Brexit mean for the Art World?
The art market concentrates in nodal international cities around the world; it is supported by the city’s financial and cultural historical heritage that attracts ongoing market activity. If we consider the estimated aggregate sales and pricing in the art market from all sources (galleries, dealers, private sales, auction); New York is the leader, with London in second place, and Hong Kong in third. Cities such as Tokyo, Paris, Berlin, Geneva and Milan also plays a major role, in supporting networks such as emerging artist, art fairs, biennials, international art forums.
For art professional who understands the basic concept of capital flow, the future growth in the art market is driven by an influx of new demographic of younger buyers and collectors; and the consequence of Brexit has put London and the UK at an immediate disadvantage. Dealers and artists maybe in Dubai or Rome on any given week, but masterpieces always end in London. For the art trade, no country in Europe is more intricately tie in tradition than the UK, with a wealth of local expertise, backed by solid British law.
The ‘tectonic plates’ for the European art market is slowly shifting for the first time in 300years, since the founding of leading auction houses which planted its roots in London. The UK is the second largest art market in the world, largest in Europe, worth $13.5 billion in 2016. Bringing in artwork from anywhere in the EU, or selling it to anyone in the EU, without the need of paying any additional taxes or worry about border restriction is so important for collectors, dealers, artists, auction houses, art investment funds, and museums. A survey conducted across art galleries in the UK revealed 49% galleries convinced the freedom of movement is crucial; the fears of a gradual decline in competitiveness in the art industry are evident among art professionals. The EU-UK Brexit trade deals will directly affect; artist’s resale right (ARR), EU funding for the arts, export licenses, VAT, and anti-money laundering regulations.
Both EU funding for the arts and VAT will have the most drastic impact on the UK art industry from the five main points mentioned (above). EU funding runs in millions of pounds a year contributing a significant portion for UK museums, the funds then filters lower down the hierarchy in; art insurance companies, art specialist services, and academic institutions. This cannot be replicated by an individual member state; if EU funding is lost, future funding will be the sole responsibility of the UK government or alternative funding must be found elsewhere. The UK government is undergoing a colossal cost-cutting program since the beginning of the 2008 financial crisis; there is no guarantee that the future of the UK’s arts, creative industries and cultural education can be fully safeguarded. UK has the lowest import VAT in Europe, at 5.0%; the import tariffs were once regulated at a flat rate would be lost in the event of Brexit. This may result in works of art be sold in elsewhere in EU; with additional tax will pass onto British dealers and auction houses in the UK who sells to the EU.
While the future of funding and the free movement might look bleak, the EU-UK trade deals still many years away. The Q1 2017 auction results proof to be a record breaking year for auction houses in the UK, let’s hope the booming times continue beyond Brexit.