Buying a Picasso? Do it in New York

For Bond Street's biggest art and antique dealers, taking a gamble is all part of the game. Is that a Constable hiding under the grime? Could that blue and white Chinese vase turn out to be 14th century? But today, some of them are facing the biggest and least amusing gamble of their careers: should they move their businesses to New York or stay in London - where new taxes imposed by Brussels could bankrupt them?

Alarm bells echoed down the Street this month when the venerable picture dealers Pace Wildenstein announced that, after 60 years, they would not be renewing the lease of historic 147 Bond Street, a 17th-century property which housed Lord Nelson as he convalesced after losing an arm, and which was one of the first purpose-built commercial art galleries. They will trade from offices while maintaining their gallery in New York.

Yesterday, the world's greatest dealer in Chinese artworks, London-based Giuseppe Eskenazi, renewed his threat to decamp to New York, despite having spent pounds 4m refurbishing his Clifford Street gallery. And Johnny Van Haeften, renowned dealer in 17th and 18th century Dutch paintings, described art dealing in London as a dying profession. "It's no fun any more," he said. "I can't wait to retire." He is 45.

Grousers in leather armchairs? Fogeyish Europhobes? Not this time. European dealers and auctioneers are jealous of the London market, the Brussels bureaucrats mean business and the new EU regulations - no fewer than three different ones - have teeth that have begun to bite. They are: a 5 per cent tax on artworks imported into the EU (Britain so far pays only 2.5 per cent); a proposed 2 or 4 per cent droit de suite tax (on proceeds to living artists or their heirs) from next year, on the sale of artworks less than 70 years old; and stringent export regulations intended to curb smuggling of antiquities.

All three are a powerful deterrent to the London market's regular buyers and sellers of artworks living in non-EU countries, but the EU as a whole will be the loser. The winners will be dealers and auctioneers outside the EU who have fostered bureaucracy-free markets - in New York, whose turnover overtook London's in the Eighties, in Geneva and Zurich, and in South-east Asia, especially Hong Kong.

Already, the 2.5 per cent import tax has caused measurable damage to the London trade. Last year, while UK exports of art and antiques to non- EU countries rose by 4 per cent, imports fell by 17 per cent. Anthony Browne, a Christie's director who is chairman of the British Art Market Federation of dealers and auctioneers, a pressure group formed last May to combat the EU threat, says: "This is the first time to my knowledge that imports have fallen while exports have risen.

"It is a ludicrous situation. Why impose a disadvantage on London that will drive the trade out of the EU altogether? We don't need a level playing field with Paris. We need a level playing field with the rest of the world. The EU is shooting itself in the foot."

The art trade elsewhere in the EU, apart from Paris, is predominantly domestic. Hence the Euro-jealousy of the truly international market in London, world centre of connoisseurship for more than two centuries. The London market, with up to two-thirds of its trade coming from non-EU countries, turns over pounds 2.1bn a year, compared to pounds 3.5bn to pounds 4bn for the EU as a whole, Britain included. The British themselves are not great buyers of art. But the London art market is as the City of London is to world finance: an international entrepot. With New York its chief challenger.

Faced with a choice between New York's open market and London's EU taxes and anti-smuggling strictures, where will non-EU vendors, the Japanese for example, choose to consign their treasures? A survey by the Department of Trade and Industry has estimated that droit de suite alone could rob the UK of an annual pounds 68m in art sales and 5,000 jobs in the art trade. The noble intention of droit de suite is to succour starving artists in garrets, but in France 75 per cent of its revenue has been found to be channelled to a wealthy elite of six families, including Picasso's.

Mr Eskenazi, 57, who came to England from Milan aged 12, has a turnover of some pounds 20m. Because of his scholarship, which is equal to that of any museum curator, he can sell Chinese bronzes for pounds 1m or so. For the first time, he has organised a selling exhibition in New York, coinciding with the International Asian Art Fair there in March. "Maybe I'm just testing the water in New York out of desperation for what's happening here," he says. "The British government doesn't seem to understand the harm it's doing. It's as if we are being pushed out. If they go on pushing I shall leave."

How many other London dealers are thinking of pulling out to New York? Johnny Van Haeften says: "I think we all are. It's a nightmare. What advantage has any collector in Switzerland [a non-EU country] in sending a picture for sale in London these days?

In New York, a leading Chinese artworks dealer, James Lally, says: "It's more congenial here. More and more London dealers are coming to meet clients. And Giuseppe's forthcoming exhibition speaks volumes about the direction business is taking. If well-to-do collectors cannot play in London, they have no trouble finding other places to play."

PICASSO AT A PREMIUM: This is how the proposed regulations could make a single auction transaction in London more than a million dollars more expensive than in New York. Picasso's Le Miroir (above) fetched a hammer price of $18.2m at Christie's New York in November 1995. In addition, the buyer paid Christie's commission of $1,822,500 - 15 per cent on the first $50,000 and 10 per cent on the rest of the hammer price - bringing the full price to $20,022,500. The seller paid Christie's commission of 2 per cent of the hammer price plus their expenses (insurance, etc) of 0.5 per cent, totalling $455,000. Total charges for the transaction: $2,277,500. Under proposed EU regulations, if the same picture were sold at a London auction to a European, there would be additional charges: the buyer would have to pay a 5 per cent import tax on the $20,022,500 - that is, $1,001,125, (in sterling, of course), and the vendor would have to pay an additional 2 per cent 'droit de suite' - that is, $400,450. Total extra charges: $1,401,575. The London transaction would therefore cost a total of $3,679,075 - 61.5 per cent more expensive than in New York.