This article is taken from the May 2022 issue of The Critic. To get the full magazine why not subscribe? Right now we’re offering five issues for just £10.

The arrival of the annual Art Basel report on the global art market is of particular interest this year since it offers an overview of the relationship between money and art in 2021; that is, both during Covid restrictions and as they began to ease. And what the new report demonstrates above all is the resilience of art as an asset — but also, secondary perhaps, as food for the soul.

In 2021, sales by dealers and auctioneers not only recovered all the ground lost to the pandemic but surpassed the last pre-Covid year, 2019. The market surged to more than $65 billion, up some 30 per cent from 2020 to reach the third-highest sum since 2009 as would-be buyers with itchy fingers who had accrued money during the restrictions at last found ways of relieving themselves of it. Online sales are all very well, it seems, but no real substitute for physical spaces and real-life contact with the art.

Smiles all round then. Except that the headline figures also overlay some quirks that could yet emerge as real flaws — depending on your place in the world.

The average time between purchase and resale of NFTs was just 33 days

Top-end dealers had a very good time of things: those working in the $5-10 million bracket saw sales increase by more than a third. Nevertheless, the reliance on high net worth individuals (more than a third of whom spent upwards of $1 million on art and antiques in 2021) is precarious since it relies on the availability of high-quality works.

For the workhorses with a turnover of less than $250,000, things were less peachy: only half saw any increase in sales at all.

The year also saw the crazed growth in NFTs (non-fungible tokens) continue unabated. In 2019, the NFT market was worth $4.6 million but at the close of 2021 that figure was more than $11 billion, of which art-related NFTs amounted to more than $2.5 billion, a hundredfold yearly increase.

What also emerged, however, was that investors — the majority Generation Z-ers — are flipping their NFTs at speed: the average time between purchase and resale was just 33 days, and most of these sales happened on blockchains outside the art market. So NFTs seem to be neither works to keep and savour (which comes as no surprise, admittedly) but nor do they appear to be materialising into the gift-from-the-gods cash cow that the market first mistook them for.

It is, however, the UK art market that has a real cause for worry. A near-15 per cent yearly increase (to more than $11 billion) should be a cause for celebration, but … that total sum is lower than in 2019 and the recovery in Britain was less springy than in both the US and China. While the US remains the dominant market, accounting for more than 40 per cent of global sales, the UK market segment actually declined by 3 per cent in 2021 resulting in a 17 per cent global share — the lowest proportion in a decade — and the loss of second place in the market to China (which has seen 25 new auction businesses open since 2020).

There seems little doubt that this decline is related to Brexit and the imposition, since January 2021, of VAT and other charges on all imports to the UK from EU states, as well as anti-money laundering regulation, which has implications for the government’s heralded UK freeports.

There remains clear blue water between the British market and the Continent

While in the US, the value of imports of art and antiques rose by 60 per cent in 2021, in the UK they fell by nearly 20 per cent; they now amount to only half the value achieved in 2019. Although many top-grade works of art arrived from countries outside the EU, in 2021 at least, the UK was a less appealing place to buy and sell blue-riband works than previously.

Indeed, what many in the art market feared seems to be coming to pass: a loss in trade here benefitting competitors in Europe instead. While the US has subsumed some of the top-notch works that would have been sold in London, it is France in particular that has benefitted, with strong growth elsewhere too. 

France’s art market saw a 50 per cent growth in sales in 2021, to just under $5 billion. It accounts for 7 per cent of sales globally, occupying fourth place in the world, its strongest position for a decade.

While Germany and Spain account for just 2 per cent and 1 per cent of global sales respectively, they too responded to the pandemic contractions better than the UK. For Europe as a whole, measured without the UK for the first time, sales were up by just shy of 40 per cent. There remains clear blue water between the British market and the Continent, but the signs are that it is drying up at pace and the UK’s prominence as a place to buy and sell the most prestigious art is under sustained threat.

If the government wants to shield the UK art market against the dripping of both reputation and money, the first thing it should do is to lower the VAT on imports from the current 5 per cent (in the US it is 0 per cent, in China it is 3 per cent). Alas, there are no signs yet that it will.