Can the British art market rebound?

Excerpt from the July/August 2022 issue of Apollo. Preview and subscribe here.

IMay in the international art market means New York – where this year a record $2 billion worth of artwork was hammered at Sotheby’s, Christie’s and Phillips – at the end of June, business shifts to London.

It looks very much like the status quo after the huge pandemic disruption and previous nervousness about Brexit and its likely effects on the London art market. But six years after the Brexit vote and 18 months since the UK officially left the European Union, it is becoming clear to many that action is needed if the London art market is to maintain its position in the top league of the art world.

“London has huge international appeal,” says Lucie Kitchener, managing director of the newly opened art and luxury fair Masterpiece (until July 6). “But the government has not yet seized the opportunities that leaving Europe could offer us. They must do everything to remove administrative and financial barriers: at the top of the range, the art market must be competitive on a global scale.

The UK art market grew rapidly during the 1990s and 2000s. New York dominated the post-war period, but research by analyst Arts Economics showed that in 2008 – when the market had climaxed before if felt the full impact of the financial crash – London was almost neck and neck. That year, the US, UK and China held 35%, 34% and 9% of the pie respectively. The EU share, excluding the UK, was 14%.

The latest art market research by Arts Economics in 2021 presents a rather different picture. The EU returned to 14%, with France taking a 7% market share. But the UK fell to 17% – its lowest share in a decade. The United States, on the other hand, accounted for a 43% market share and China rose to 20%. “The UK has been through a difficult time,” says report author Clare McAndrew. “Not only has it had to deal with the challenges of the pandemic, but it is also accepting the adjustments brought about by Brexit. The UK experienced a slower recovery from the 2020 recession, while the US, China and France have all rebounded strongly.

Basically, the British art market is what Anthony Browne, president of the British Art Market Federation, calls “a warehouse” – a port or trading post where goods are imported, stored or traded, usually to be re-exported. Its collector base is international, not local. This means London is competing on the global stage with cities with lower taxes and more liberal regulations such as Hong Kong, still a gateway to the huge Chinese market, and New York. Despite leaving the EU, the UK, for example, continues to charge 5% import VAT on art – the lowest level allowed by EU rules – while Hong Kong and New York do not.

The dominance of the UK market was clear, with its Frieze London fair inspiring the art world year after year – the 2009 edition is featured here

Meanwhile, until the UK officially left the EU, it was the most attractive entry point into the single market. (Once inside, the artwork can roam freely.) Now that benefit has shifted to Paris-centric France, which charges 5.5%: some EU countries charge upwards of 20% .

Pierre Valentin is a leading art lawyer based in London. He says there is a risk of a sharp decline in London “from an international market to a domestic market within five years” unless the government acts. “We need the government to shift into fifth gear,” he says. Otherwise, there is a danger that “a large part of the international art market will move west to New York or east to Paris or other European capitals – this is already happening. occur “.

Anecdotal evidence seems to confirm this: in June, Hauser & Wirth announced that it would be adding a Parisian gallery to its locations, joining David Zwirner and White Cube. Once the epitome of ‘Cool Britannia’, White Cube announces that after 30 years of existence, it will finally open a gallery in New York. Art Basel’s decision to launch a new fair, Paris+ by Art Basel, at the Grand Palais Éphémère (October 20-23) just days after London’s biggest fair, Frieze (October 12-16), has only to add to the impression that Paris is booming.

But conversations with other great galleries of old, modern and contemporary masters tell different stories. “Thirty years ago, London was the beating heart of the Old Masters market,” says Nicholas Hall, a British-born Old Masters dealer based in New York. “Now you look at the buying power of the top 10 museums for old masters and they’re all in the United States.” The shift, he says, of the market from Europe to the United States has been inexorable “since the days of Frick and Morgan”.

Fabrizio Moretti, an Italian-born former masters dealer who started in Florence and now has galleries in London and Monaco, disagrees. “London is an irreplaceable capital of the art world: there is only New York and London, and no other European city will replace it,” he said. said. As for Paris, he bursts out laughing. “There is a reason why I live in Monaco,” he says. “I love the sea, there are tax advantages and emotionally I like being close to France and Italy, my country of origin. But no one in business can live a long time with the French bureaucracy. It opens a lavish new gallery over three floors and two adjoining historic buildings in London’s Duke Street, St James’s, on July 1.

There are several forces at play, says Brett Gorvy, partner of the new LGDR group with galleries in New York, Hong Kong, London and Paris. Brexit and the pandemic have combined with the rise of Asian economies and transformative technology. “What we’re seeing is the art world being deconstructed, or reconstructed, depending on how you see it,” he says. “Paris is now clearly the anchor of Europe,” he adds, with London having a more “seasonal” interest around major events such as Frieze.

“We are obviously in a period of adjustment, but the outlook for London is quite positive,” says Nicholas Maclean, co-founder of Eykyn Maclean, which has galleries in London and New York. “I get a little frustrated when people start saying the art industry is over here because it’s not, it’s just changing.” He points out that while major galleries are opening spaces in Paris, they are not closing their London galleries. Indeed, Hauser & Wirth is doubling its already significant exhibition space with the acquisition of the lease at 19 South Audley Street, Grade II listed, Mayfair. “We have a large number of important artists who settle here. And that’s basically the basis of the whole art market. This alone will allow London to remain an important centre,” says Maclean.

The Arc de Triomphe in Paris

The wrapping of the Arc de Triomphe in Paris in September 2021, posthumous work by Christo, and a sign of the city’s creativity in action. Photo: Stéphane Cardinale/Corbis via Getty Images

Most of the British art world was philosophically and vocally opposed to Brexit. We get the impression, not without reason, that the current Conservative government is not interested in the arts. Culture Secretary Nadine Dorries appears to be focused on dismantling the BBC and Channel 4 funding structures and doing nothing else. Meanwhile, Jacob Rees-Mogg, the Minister for Brexit Opportunities and Government Efficiency, is determined to cut the Arts Council of England and Historic England rather than cut red tape in the market for art. ‘art. Chancellor Rishi Sunak has provided more than £1.5billion of pandemic rescue funds to the arts, generous by most international standards, but even so, not-for-profit UK museums and galleries – a draw major for international art collectors – are in trouble. It’s easy to look across the Channel at France’s major cultural projects: Christo’s 2021 wrapping of the Arc de Triomphe or the massive €466 million renovation of the Grand Palais. .

For economic reasons alone, the British art market deserves support. It is a thriving industry, generating around £9 billion in sales for the UK economy each year and directly supporting over 40,000 jobs. There are several measures the government could and should consider to counter the perceived unease in the market. Since she chose a “hard” Brexit, it makes sense to deregulate to help the art market stay competitive.

Experts say that the UK could reduce the rate of import VAT on art to zero, in line with Hong Kong and New York: this is administratively simple and would mark a desire to make trade more fluid. Weak European legislation, such as the artist’s resale right and the rules for importing cultural goods, could be reviewed and improved. Artistic enterprises could be included in government freeport projects, from which they are currently and inexplicably excluded. It might even be easier for major collectors to bring the artwork they already own home to the UK, or exempt certain art transactions from capital gains tax by using tax breaks similar to “similar” regimes in the United States.

The UK could also seek to attract artists – including overseas talent attracted to London’s top art schools – to build successful art careers in the UK by investing in arts education or subsidizing studios. , whose price has skyrocketed since the 1990s. The art world itself can galvanize to organize ambitious exhibitions and create the kind of buzz in museums, galleries and collectors’ spaces that made the success of the first “Frieze Weeks”.

It’s easy to feel nostalgic for the London of the turn of the millennium, when millions of lottery money poured into the UK’s arts and the city fueled a booming art market . But fond memories of the world before the crash of 2008 are of little use. London still has a lot to offer, but the art world and the government have an important role to play. As Kitchener says, “We can’t be complacent: we can’t say, ‘There’s so much here, we don’t have to do anything.’ London has plenty of strengths, even post-Brexit, and it would be remiss not to use that as a base to build on.

Excerpt from the July/August 2022 issue of Apollo. Preview and subscribe here.

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