The depreciation of the British pound (GDP) following the UK's decision to leave the European Union could hurt demand for imported wine, including from Australia.
The UK is the world's largest market for imported wine by volume and is the largest importer of Australian wine.
Agribusiness specialist lender Rabobank says sterling's dramatic devaluation following Britain's vote to leave the EU is of immediate concern because a lower pound means it's more expensive for the UK to buy wine from overseas.
"While many major wine suppliers to the UK market will have foreign exchange forward cover in place to see them through the next six to 12 months, they will be nervous about where the GBP will be trading beyond that horizon, and how a sustained depreciation may feed through into higher wine prices and lower demand," Rabobank said in its quarterly global wine update.
Rabobank also says the uncertainty over the British economy following the Brexit vote could weigh upon business investment, consumer sentiment, spending, employment and wages growth.
With an increased chance of a slight recession in 2017, growth in consumption is at risk.
Rabobank says these issues affect all wine suppliers to the UK to a similar degree. But, Australia is the biggest with more than 23 per cent market share, according to Wine Australia, the government service body for the wine and grape sector.
The value of Australian wine exports to the UK and continental Europe in the year to March 2016 was about $581 million.
Rabobank also says that Australia's total wine exports fell by 7.6 per cent in volume terms in the four months to April 2016 but rose by 3.3 per cent in value terms.
Export volumes rose in the growing China market but fell significantly in other large destination markets, including the US.
Although volumes to the US fell, the value of the wine increased, boosted by strong growth in the average value of bottled wine shipments to above $A4 per litre FOB (free on board).
On the issue of supply, Rabobank says Australia's wine grape production appears likely to surpass last year's level, which was right on the five-year average.
"The growing season has been conducive to good yields and ripening across much of the country, despite more testing conditions in some isolated pockets," Rabobank said.
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