NB: Post the UK’s withdrawal from the EU, how has the process of transporting fine art changed?
JF: The customs regime has changed, which means the whole process has now become more bureaucratic, more time-consuming, more hassle, and inevitably more expensive.
Pre-Brexit, for items in free circulation within the EU there were no stringent checks. Paperwork could be done in the office and then you could drive straight off to anywhere in Europe, dropping off at multiple locations without issue.
As it is now a full import and export scenario, there are more levels of paperwork to complete, and that paperwork is checked more often. You are also now only allowed to drop off at just one location. A local agent must be used at each country, so you need to drive to their warehouse, drop off the items, and then they drive it on. This means incurring extra expense engaging a local company and an extra level of handling – which comes with additional risk of damage.
The admin of transporting fine art, therefore, now takes quite a bit longer, and the cost is increasing due to the documentation fees and increased freight fees resulting from the pandemic. However, we aren’t experiencing any stoppages within Europe.
NB: Do you think there will be a reduction in items coming through the UK due to import tax rates?
JF: Certainly – it used to cost less at 5% VAT to import to the UK vs 5.5% in France and higher in other European countries. On high-value items, that can make a huge difference, so back then it would make more sense to import to the UK and then benefit from free circulation throughout the whole of Europe. Now, that is no longer the case - if you import to the UK and then transport elsewhere in Europe, this now counts as a full import to whatever other country in Europe the art is going into. So, the UK is no longer able to be used as a gateway to Europe.
However, there is a glimmer of hope – since the Brexit vote in 2016, BAMF (The British Art Market Foundation), I believe, has been lobbying the Government to remove the 5% import VAT on artwork; rationale being that this was an EU instruction which we did not have before the EU. Historically, London has always been the centre of the art market. If art could come to the UK with no duty, this would be a massive benefit for the art market and all service businesses connected to art – but I’m sure that’s low on the list of the Government’s priorities!
NB: Has Covid masked the Brexit situation?
JF: The answer to this I believe is yes, as the lockdowns have closed up shop and the volume of art has not been moving throughout Europe. A barometer for this will be seen when TEFAF returns. That’s when a very large volume of art and antiques goes out of the UK and into Europe. At this point, any delays with the number of trucks and the pressure on customs with paperwork may or may not be seen.
NB: Speaking of Covid, you mentioned earlier that it has affected freight fees. Could you go into a bit more detail?
JF: So, the main means of transport for art are either sea freight or air freight, or road freight within Europe. Prior to Covid, sea freight rates had always been fairly consistent, with any increase occurring at a very gradual rate. Since the start of Covid, sea freight rates have as much as tripled.
Air freight rates have increased considerably, with FedEx air freight rates in some cases more than doubling. For air freight, this is largely down to fewer planes flying – most of the freight would travel under passengers on flights, which obviously has not been possible since March 2020, and fewer flights means high demand and higher costs. When people are flying again, in theory, air freight charges should come back down.
Hopefully, this will all iron out as restrictions ease and the world opens up again, but I don’t think in terms of pricing we’ll ever get back to the rates we had 18 months ago, although it would be nice to think that they would!
NB: Has Covid driven people to buy more art?
JF: Yes, I think so, and not necessarily only at the top end of the market; people have been spending more time at home and saving money they would usually spend on commuting and holidays, and many have been using this time and money to renovate their houses or spruce up their studies/work from home areas, while others have simply spent more time shopping for art online. Middle market auction prices are strong at the moment, with auction houses having all-but complete sell-out sales.
NB: I’m assuming some of those people are putting this art in store due to lacking space in their homes or moving house. I recall a few years ago that K Pak was going to develop additional storage space for private clients. Has that happened and, if so, what impact have you seen?
JF: It did happen! Initially though, we lost a few European storage clients because of the threat of Brexit and wanting to move everything back into Europe to avoid the import tax that would become due post-Brexit upon returning items to European countries. But, it is definitely on the increase now – perhaps due to Covid.
If the import VAT does go to 0%, I’d expect to see even more demand for fine art storage in the UK, which would be fantastic.
NB: Are there any other areas where Covid has had an impact on fine art?
JF: With elements of the art market having been in the dark ages where IT is concerned, it’s now had no choice but to be dragged online. There have been tech companies trying to get the art market online for years to little or no avail, but now due to Covid the market has had to adapt. For dealers, there has been the immediate need to replace their shows and their marketing space onto online platforms, including upgrading websites and embarking on 3D photography and new technology in order to adapt and survive.
NB: How has K Pak used technology to adapt?
JF: The one thing we have done, apart from the ongoing building of more storage rooms, is to put in quite a sizeable photographic studio which is about 1,000 square feet and 3 metres tall. This has everything required from a non-portable perspective to facilitate photoshoots and filming for photographers – so all photographers need to do is turn up with their cameras, and we’ve taken care of the rest. Our space is also big enough for photographers specialising in 3D filming, with enough room for multiple cameras to capture all angles. It’s our space to create virtual viewing rooms for our clients.
NB: How has the transportation side of your business been impacted by Covid?
JF: We went from being incredibly busy in the lead up to Maastricht 2020 to nothing literally overnight. Things have now picked up domestically, which is great, but the lack of international travel and art fairs leaves a huge hole because a large proportion of our international art shipping revolves around the fairs themselves and post-fair deliveries to purchasers.
NB: What would make a difference?
JF: The world opening up, enabling international travel, in particular the art market centres - being the US and Hong Kong/China.
I think it’s also a lot about people’s confidence - people will need to feel ready to travel, and that should be the impetus for the art to follow.
NB: Thinking ahead to 2022 and beyond, what do you think the fine art exhibitions of the future will look like?
JF: People in the art world are gregarious and would still prefer to be in a room with lots of clients and a glass of champagne, so I do foresee the market getting back to that as soon as it is safe. Frieze /Frieze Masters and PAD in London in October appear currently the first “big” shows going ahead, and then, for K Pak, we are looking ahead to The Winter Show in New York in January – no doubt there will be the plethora of shows in Florida in December.
I don’t think there will be quite so many shows in the future, but the big ones – Maastricht, Masterpiece, etc. – will continue. It may be that people take fewer objects to them, or there are fewer people in attendance. A lot of it depends on the confidence in and desire for international travel – hopefully by March next year (TEFAF time) we will be okay, but I’m aware I probably said this last year!
Lots of people are doing virtual shows and the feedback has been positive, so virtual or hybrid shows will definitely play a much bigger part in the fine art exhibition world of the future.
NB: Do you think the way art is viewed will be different?
JF: Probably, yes. In theory, after 19th July, we will no longer have to socially distance, but I’d imagine the majority of galleries will keep these practices in place. It will be a slow process while people’s confidence in socialising is rebuilt, and gallery owners will be wary of putting visitors off by having too many people in one enclosed space. It is hard to ventilate these spaces - it isn’t always possible to open windows in galleries in the interest of preserving the art, and it isn’t possible to keep doors open due to security.
NB: Thank you so much for your time and insights James – do you have any final thoughts?
JF: It’s been a pleasure to catch up with you on this topic, Nick. I think my one silver lining from the pandemic is that it has given people more time to appreciate art - the demand for middle market auctions indicates this. And we will keep our fingers crossed for the UK import VAT on art to be removed!