Drink up quick: Sterling drop is a “grave” concern for the wine industry which relies almost solely on imports
Today's crash in the value of sterling may have left many of us wanting to drown our sorrows. But if you're a wine fan, you might want to drink up quick and make sure you stockpile too while you're at it.
While Britain might have been dubbed the "beating heart" of the global wine trade, almost 100 per cent of all the wine we drink is imported from overseas – which will leave us in the lurch and braced for price hikes if the pound continues to flounder.
"The fall in sterling as a result of the Brexit vote is of grave concern to the wine industry," Miles Beale, chief executive of the Wine and Spirit Trade Association told City PM
"99 per cent of all wine consumed in the UK is imported wine, meaning that the currency fluctuation has been felt. This not only affects consumers by driving up the prices but also impedes heavily on jobs. The UK wine industry directly employs 170,000 people and a further 100,00 through the supply chain."
Fine wine might not be doing so fine
If the overnight flash crash – and falls during currency trading today – gain momentum and the pound does not recover, the fine wine sector will also be further squeezed when more wine needs to be bought in.
At present, the UK's fine wine traders have not yet run out of stocks. However, the pro-Brexit vote and subsequent devaluation of the pound has encouraged such a boom in trade that the market is starting to run low.
Read more: Burgundy wine prices set to rise as harvest likely to fall by a quarter
"We are not at the bottom of the barrel yet as far as UK stock goes," said Giles Cooper, head of marketing at BI Fine Wine.
"There is no avoiding the fact that there will be an awkward period where our buy prices go up and inevitably our sell prices will rise but perhaps not at the same speed. So there will be a challenging phase of margin squeeze. And I think we will have to try and manage the rising prices as carefully as we can."
Fine wine has been touted as a safe haven in volatile post-Brexit vote markets, as it tends to perform well when the pound is weaker and boasts a number of defensive characteristics.
However, the fall in the pound has particularly attracted Asian wine buyers, who will stock up on wine they intend to consume rather than invest in.
Read more: The popularity of English sparkling wine soared this summer
"When the currency went for that period of time we were inundated with sales from Asia again, as we were the day after the referendum. It goes to show a five to 10 per cent currency swing really does open the floodgates and the stock that is going to Asia as a result is gone from the market because it's going to Asia to be consumed," Cooper added.
Now might be the moment for English wine to shine
There might yet be a light at the end of the tunnel for the UK's domestic producers, despite the battering imported wine could be about to take.
English drinks will be well placed to ride out a short-term fall in sterling and longer term renegotiations of trade deals, Rabobank has said.
Last year, 37 new English wine producers and vineyards opened and though sales are mostly restricted to the UK market at the moment, exports are expected to rise over the next four years.
Kent-based producer Chapel Down announced a new partnership to send its sparkling wine to the US for the first time at the end of last month.