Spanish wine sector prepares for Brexit

With the final Brexit deal pending as March 29, the scheduled date of Britain's exit from the European Union (EU), imminent, businesses in Europe, such as wine sector in Spain, are preparing for the worst.

Spain's Secretary of State for Employment Yolanda Valdeolivas commented at the start of March that Brexit uncertainty was one factor behind a rise in unemployment in the Spanish agricultural sector in February.

In addition to the already affected agricultural sector, Spain's wine sector, which has exports to Britain, is also believed to be hit.

According to "Decanter" magazine in 2016, Spain exported 12.3 million cases (one case = 12 bottles) of wine to Britain, with only Italy and France in the EU sending more.

"The UK is our first market for wines...specifically for several regions such as Jerez, Rioja, so it's very important," Jose Luis Benitez, the General Director of the Spanish Wine Federation (FEV), told Xinhua.

He predicted that Brexit would have both short and medium term effects for the wine sector, with issues at British border the first having to be addressed.

"In the short term the problems are going to be motivated by the situation at the border and the administrative complications regarding the papers that are not needed now, but will be needed on March 29 in the case of a no-deal," he told Xinhua.

Benitez explained that currently in the EU, there is an "electronic document which is automatically generated before the wine leaves the winery, which is checked in the UK and the wine is automatically permitted to be sent," he said.

However, as of March 29, this electronic document will no longer be valid. "So what's going to happen?" asked Benitez, before answering his own question "We don't know yet."

Another question to be answered is over the customs duties which will now have to be paid when Britain leaves the free market and once again this depends on what happens between now and March 29.

"In the case of a no-deal the UK will become a third country from EU trade aspects, so that means that the customs duty will be the highest possible; the same as for any country the EU doesn't have a trade agreement with," he explained.

Although the FEV Director General was positive that "eventually" there will be a trade agreement between Britain and the EU, he highlighted that any deal "cannot begin to be negotiated" until the separation is complete, which would mean Spanish (and other European) wines being hit by high tariffs.

If Britain does crash out of the EU without a deal, studies have calculated it would have an important negative effect on the British economy.

"Many think there will be a drop in the GDP of the UK, that could mean an economic crisis, leading to a fall in consumption and would affect how much money people have and consequently lead to a decrease in the demand of wine," said Benitez, who added that if "the British consumer doesn't have money to spend, wine is not a necessary product."

In a recent interview with the "El Pais" newspaper, Inigo Torres from the Grupo Rioja wine association echoed those words, saying that in the case of a no-deal Brexit, "Sterling would further depreciate and the UK would turn into a third country with no customs agreement and probably higher duties. And that would amplify the negative effect."

Figures published by Grupo Rioja show that with Sterling already losing value in the run-up to Brexit, the first nine months of 2018 saw a 16 percent fall in the exports from arguably Spain's best known wine producing region to the UK.

Many wineries from the region have made an effort to export more wine before March 29 with Santiago Frias, general director of Bodegas Riojanas telling "El Pais" his winery had already completed 90 percent of its orders for the first six months of the year to the British Isles.

"What is clear is that wineries should now have any wine in transit on March 29, it is much better if the wine has arrived already," agreed Benitez.

He explained the FEV had held "a lot of meetings with Spanish authorities" over Brexit.

"We are preparing and we are analyzing the situation and we are: informing the wineries, advising them of specific issues they have to have in mind over what could happen," he said, although he admitted the lack of agreement meant it was still "a very uncertain situation."

British Prime Minister Theresa May will make another attempt to get Members of Parliament to accept her Brexit agreement this week in what promises to be another busy week in the House of Commons, meanwhile Benitez attempts to look on the bright side.

"We have to be optimistic and I have to say that if British customers like Spanish wines now, hopefully, they will keep on drinking Spanish wines in the future."