While the UK navigates post-Brexit regulations and economic challenges, its art market is showing signs of resiliency and growth.
The United Kingdom has endured numerous uncertainties over recent years.
A rapid succession of prime ministers, slowing growth, surging inflation and the country’s departure from the European Union have contributed to a lingering sense of instability. How has all this affected the UK’s art market?
Despite the unsettled backdrop, the UK remains a significant destination for collectors worldwide. Overseas art buyers accounted for 60% of dealer sales in 2022.1
Having briefly slipped into third place worldwide, the UK market reclaimed second position from China in 2022, with sales of $11.9bn – or some 18% of the global total – according to the latest Art Market Report.*
(Admittedly, this is still lower than the $12.2bn level that UK art sales had reached in 2019, despite 5% growth in 2022.)
The UK’s leapfrogging China in 2022 resulted from several factors. While the UK quickly shed pandemic restrictions, China’s adherence to strict Covid polices resulted in the cancellation or postponement of auctions, art fairs and exhibitions. The UK art trade’s strong recovery from the pandemic downturn also contributed, with average overall sales up 22% compared to 2021.4
Brexit impact on UK art imports
As pandemic effects receded, the UK art market began to feel the true impact of Brexit.
Since the UK left the European Union on January 1, 2021, its art world has had to grapple with numerous resulting complications. Among them are complex customs procedures, such as EORI (Economic Operations Registration and Identification), data protection issues, and copyright laws. Employing staff from the EU has become much harder because of the end of free movement of labor, which had allowed EU citizens to settle and work as they pleased in the UK and vice versa. Cross-border dispute resolution and logistics are also much less straightforward now.
Before Brexit, the UK boasted the lowest rate of value added tax (VAT) in the EU, at 5%.5 Non-EU vendors could import artworks to the UK paying the 5% rate and then transport them to EU countries without incurring further import duties. European vendors could easily send artworks to the UK without additional duties.
All this changed when the UK left the EU. Artworks and antiques imported into the UK from EU states are now subject to the same 5% rate of import VAT, whether imported privately or by VAT-registered businesses.6 European collectors sending artworks acquired in the UK to EU states must now pay import VAT to the country to which they are importing. In addition, any artwork that crosses the UK border in either direction must clear customs and regulatory checks, adding time and expense to shipments.7
It is worth noting, however, EU sales account for around 20% of the value of imports and exports from the UK.8 While not insignificant, it is a relatively low percentage. The ongoing effects of Brexit may thus prove to be limited overall in the art market. This is especially at the top end, which is distinctly global in its makeup.
That said, following the implementation of Brexit regulations, the UK saw a marked decrease in art and antiques imports, and France became a major entry point for imports and exports to and from Europe and the rest of the world. As a result, Paris’s importance as a global art market hub has grown.9
The rise (and possible fall) of the French art market
France’s art market has greatly benefited from the UK’s post-Brexit fallout. With $5bn in sales – 7% of the worldwide total – France ranked fourth for global market share in 2022. 10 The French auction market saw a dramatic 50% increase compared to 2020 in overall sales.11
Leading gallery David Zwirner opened a new gallery space in 2019, while Hauser & Wirth will be opening new space in October of 2023. Paris+ par Art Basel, a major new art fair, inaugurated in October 2022.
This period of rapid growth in France’s art market could soon run out of steam, however, perhaps to the UK’s advantage. New tax laws, resulting from a recent EU directive on VAT rates, are due to be adopted as French law before 31st December 2024.12 Major changes to tax regimes, specifically to the VAT margin scheme, threaten to make sales of art in France considerably more expensive.
French dealers and artists fear a potential catastrophic effect on their market and are currently lobbying their government to overturn this law by summer 2023.13 But if the new tax laws are ultimately enacted, it may benefit other global art market leaders, including the UK, US, Hong Kong and Switzerland.14
Art fair cancellations and new openings
The recent cancellation of two major London art fairs sent shockwaves through the UK art market. The fair organizers cited plummeting exhibitor numbers, escalating logistics and transport costs as key reasons to shut down.15 One of the fairs saw a 60% decline in European exhibitors, from 38 in 2018 to 16 in 2022. The closures are seen as a direct result of Brexit regulations as well as increasing logistics costs arising from the war in Ukraine.16
However, some positive news was announced at the start of 2023: The Mayfair Antiques and Fine Art Fair announced its return to London, following a two-year hiatus due to the pandemic. And a new event from the co-founders of Masterpiece London - The Treasure House Fair is scheduled for June 22-26, 2023. This suggests that there is still appetite from both dealers and collectors for UK art fairs.17
House of Lords Report 2023
The cancellation of the two art fairs prompted The British Art Market Federation (BAMF) and The Society of London Art Dealers (SLAD) to lobby the UK government to reduce the post-Brexit import VAT from 5% to zero. In response, the House of Lords – the upper house of the UK parliament – published a report in January 2023 arguing for the importance and value of the creative industries in the UK.
At risk: our creative future** notes that in 2019 the arts sector contributed £115.9 billion to the UK’s economy, almost 6% of Gross Value Added nationally. The report suggests that the government’s complacency toward the arts sector threatens to see the UK lose its status as a leading global centre of creative enterprise. It advises the government to unlock the sector’s potential by improving research, developing tax relief and abandoning plans to water down copyright law.18
Non-profits and governmental support
Meanwhile, the non-profit art sector in the UK, already contending with an economic downturn, is also dealing with major funding cuts. Brexit saw EU support for UK arts – previously much relied upon – come to an end. At the same time, the Arts Council’s aid to museums and foundations has become even more selective and strategic.
The government has slashed funding to many London cultural institutions, including the Camden Arts Centre, Institute of Contemporary Arts and The Serpentine Gallery. These funds are being redistributed by the Arts Council to art institutions and foundations outside of London, with the hopes of stimulating redevelopment elsewhere in the country and encouraging arts tourism nationwide.19
To offer some respite, the country’s finance minister, showed support for struggling art institutions by announcing that the Museums and Galleries Exhibition Tax Relief will remain at a higher rate until March 2026.20
Resilience and adaptability
The continuing Brexit hangover has not diminished the UK’s position as a global cultural leader and dominant player in the art market. The market’s underpinnings remain strong. These include a singular artistic heritage, world-class institutions such as the British Museum, Tate Modern and The National Gallery, as well as leading auction houses, galleries, and art schools. The UK has shown its ability to ride out cycles and adapt to changes in the art market. As a result, we anticipate that the UK art market will remain resilient.