Of all the pitfalls looming as the UK lurches towards its final parting from the EU, few are more baffling than the one unfolding in a draughty warehouse by the river Thames, east of London.

The site is run by Britain’s Liv-ex, a global wine trading group few Britons may have heard of, and stacked inside are row upon row of the world’s finest wines. Château Lafite. Petrus. Krug. Cristal.

More tantalising still is the small wooden box that workers gingerly pull out to show the Financial Times one November afternoon. It contains six bottles of 2002 red wine from France.

“That’s worth as much as a house,” says Liv-ex’s managing director, James Miles, one of two former stockbrokers who founded the firm 20 years ago.

It is a matching set of the rarest wine made by Domaine de la Romanée-Conti, or DRC, as it is known to its connoisseur fans, and it is one of the most prized — and expensive — drops on the market. These six bottles are worth £118,000, or just under £20,000 each. For now.

As the year-end deadline nears for the UK to finish its journey out of the bloc, Liv-ex is braced for a storm of red tape that it estimates will push its costs up from £5 a case of EU wine to as much as £75.

Most of this added expense is expected regardless of what emerges from the fraught UK-EU trade talks. It does not include the cost of the snaking lorry queues feared as businesses adjust to unfamiliar customs declarations and untested IT systems.

Even if a deal can be reached in the coming days, Brexit friction looms for companies across Britain when the transition period freezing previous EU trading arrangements ends on December 31.

The wine sector faces woes of its own, however, including one bit of paperwork that industry leaders say is so cumbersome, impractical and “bonkers” it could scar the sector for ever: the VI-1 import certificate.

The VI-1 is a classic example of the bureaucratic drudgery that British businesses have avoided for much of the 47 years since the UK joined the European project.

Two tree maps showing the value of the UK

EU countries have long required wine shipped in from so-called third countries, or non-EU members, such as Australia, to be accompanied by the form, which typically includes a lab analysis of qualities such as alcoholic strength and acidity.

But the VI-1 was not needed for wine shipped inside the bloc, which was just as well for the UK, a nation of quaffers responsible for a large share of the world’s wine imports for centuries.

Its roughly 33m wine drinkers still rely on EU vineyards, which accounted for more than half the value of the $4.4bn worth of wine shipped into the UK last year.

That imported wine does not all go down British throats. Britain’s seafaring, mercantile past has also made it a global wine trading hub that ships EU bottles to Asia, the US and, in the case of a trader such as Liv-ex, back to the EU again. Mr Miles says he sells more wine to the French than he buys from them, an illustration of the international nature of the market his business sits at the heart of.

Area chart showing Volume consumption of alcohol per capita in UK in litres split by wine, spirits and beer

As a result, wine businesses on both sides of the English Channel were dismayed when London decided to adopt the EU’s VI-1 form after leaving the bloc, a move that threatens to give French and Italian growers a taste of the paperwork their outside rivals have endured for years.

But squeezing a pipette of wine from a vat of South Australian shiraz for a lab test is not like uncorking a bottle of aged fine wine produced in tiny quantities from a row of vines on a French hilltop.

Opening one of the six DRC bottles in the Liv-ex warehouse would send nearly £20,000 down the drain and devalue the rest of the set, says Mr Miles, who is already retooling his business to avoid the worst pain from the VI-1.

“We simply can’t abide by this rule,” he says, explaining his firm brings so much EU wine into the UK it would need to produce some 15,000 VI-1 forms a year, at a cost of about £6m, which would render the business “heavily lossmaking”.

“We are having to totally restructure our supply chain in a way that means we do as little business as we possibly can in the UK, which is a great shame,” he said.

He has registered a new commercial entity in Belgium and is studying ways to use an exemption that means the VI-1 is not needed for EU wine shipments of less than 100 litres, or about 130 bottles.

His conclusion so far: many of the lorries backing up to his warehouse each month would have to carry less than a quarter of their normal load. “That just shows how stupid and ludicrous the whole thing is,” he said.

Liv-ex is especially exposed to the VI-1 because the firm matches buyers with sellers in the secondary wine market. Many of the 10,000 cases of wine it handles each week have had multiple owners over many years, which means it would be very hard to track down a laboratory analysis completed at the time the wine was bottled, as well as the other details needed for a VI-1 form.

But firms that buy fine wine directly from producers are also worried by the VI-1’s impact.

“It is potentially vast,” says Rebecca Palmer, a wine buyer at Corney & Barrow, a London merchant founded before the French revolution that imports fine EU wines, including DRC.

She fears a raft of complex, costly paperwork could make some fine wines dearer and scarcer in the UK, especially those produced and shipped in very small quantities.

“Not only is it onerous but from a cost point of view it all becomes prohibitive,” she says. “You've got to ask yourself the question if you are a producer: can I be bothered to supply the UK?”

Some EU producers are already bristling at the idea of sharing the extra costs with UK importers. As one told Ms Palmer: “We weren’t the ones who voted for Brexit.”

Sankey diagram showing sources of UK wine imports in 2019 in dollars

Speaking over Zoom, she says it is “absolutely heartbreaking” to think of uncorking a precious bottle of fine wine for a VI-1 lab analysis.

“We are wondering if you could do it with one of these,” she says, waving a gadget with a long needle called a Coravin that restaurants use to pour wine without pulling the cork.

Aubert de Villaine, the renowned face of Domaine de la Romanée-Conti, is also concerned by the VI-1 form.

“If we have to make an analysis of each wine we ship it will be expensive because it would be each time one bottle lost,” he told the FT. “So it would be very upsetting.”

He said the paperwork was among many unforeseen Brexit consequences and while he could not imagine it ending Burgundy exports to the UK, it was “a setback”. “We are going to be facing a situation that we didn’t expect at all.”

UK importers have spent months trying to keep their EU suppliers up to date with new trading rules that also loom for everything from the labels on a bottle to the wooden pallets used to transport wine cases: proof will be needed that they have been treated to meet global standards aimed at checking the spread of disease and pests.

One change a few weeks ago was a relief: the government suddenly pushed back the starting date for VI-1 forms for wine coming in from the EU by six months to July 1 2021.

Diagram showing product characteristics described on a VI-1 wine importation form

Precisely why this happened is a mystery. The UK Wine and Spirit Trade Association (WSTA) says it may have been because ministers had “completely failed” to alert EU member states to the new requirements, including which UK body would be responsible for administering the scheme.

The struggle for information is acute in places such as France’s Beaune, the cobble-stoned town of 21,000 people that is the capital of Burgundy’s wine production and trade.

“Nobody knows for sure what is going on,” says Pierre-Henry Gagey, president of Maison Louis Jadot, one of Burgundy’s largest wine producers. “It’s all rumour.”

He has no idea whether VI-1 forms might be needed only once, when a fine wine is bottled, or again 10 years later when it reaches its peak. A second lab analysis would be “enormously costly and actually stupid”, he says, because it would be so similar to the first.

The UK agriculture ministry, Defra, said the government understood the wine industry’s importance and was working closely with it to minimise any disruption to wine coming in or going out of the UK after the transition period. “We do not foresee this having a major impact on our excellent UK wine producers,” a spokesman said.

Victoria Prentis, the farming minister, has said industry data suggest the VI-1 would add only about 10 pence to each bottle of EU wine, equal to “less than a 2 per cent increase on an average-priced wine”.

Trade group leaders say this is part of an “astonishingly ill-informed” view that overlooks what amounts to £70m in extra costs that UK wine drinkers will needlessly bear.

Still, some changes might be welcome news for parts of the UK wine industry.

The Accolade wine group is owned by the US private equity group, Carlyle, and headquartered in Australia, but it is also the largest supplier of wine by volume in the UK, where its Hardys and Echo Falls brands are top-sellers.

Each week, about 150 containers of mostly Australian wine are shipped in bulk to its sprawling site overlooking the Bristol Channel, one of the largest wine warehouses and distribution centres in Europe, with packaging lines that can churn out up to 1m bottles in a day.

Its Australian shipments mean it is no stranger to the VI-1 form, which from next year it will have to attach to wine it sells on to EU countries, and it has had to make intense Brexit preparations.

But it is optimistic that Brexit will free the UK to seal new trade deals with countries such as Australia that bring lower tariffs and more common regulations.

“There’s definitely opportunity for us,” says Caroline Thompson-Hill, Accolade’s managing director for Europe, adding the potential benefits outweigh “a little bit of extra burden”.

Any new trade rules that make it harder to buy a bottle of French champagne might also be good news for the vineyards that have spread across slopes from Kent to Cornwall in the past 40 years.

The range and reputation of the UK’s domestic wine industry is thriving: its annual volume of exports is still relatively small but more than doubled last year.

Yet it accounts for less than 1 per cent of the UK market, says Miles Beale, chief executive of the WSTA.

He says lumbering the UK with EU rules like the VI-1 makes no economic sense. “It’s bonkers,” he said. “The UK government is choosing to roll over protectionist EU rules that will hobble a very successful sector — and for a product that is over 99 per cent imported, with more than half that amount coming from the EU. It’s madness.”

He suspects the UK’s economically important role as a global fine wine trading hub is widely misunderstood.

“We’re a tiny island in the northern hemisphere that got quite good at trading stuff,” he said, adding the UK is the world’s second biggest importer of wine by volume — after Germany — and by value — after the US.

That role is bolstered by factors such as the bonded warehouse system that developed in the UK more than 200 years ago and allows importers to avoid paying duty on goods brought in from abroad if they are then exported elsewhere.

Stream graph showing the increase in global wine consumption from 1864 to 2018 in litres

“That’s a big reason the UK wine industry is such a globally important, and profitable, sector,” says Anthony Hanson, an authority on Burgundy who spent 16 years as a senior wine consultant at Christie’s, the auctioneer.

Whatever the impact the VI-1 form may have on the UK wine industry and the 130,000 jobs it supports, ministers have shown little sign of backing away from it, leaving some businesses to fear the worst.

“It could be a nightmare,” says Patrick McGrath, managing director of Hatch Mansfield, a premium wine importer based in Berkshire.

He says it is one thing if a VI-1 form lasts the lifetime of a newly produced wine but it could be quite another for something like non-vintage champagnes that are disgorged, or briefly opened to remove sediment, continually through the year.

“Have you got to have a VI-1 form for every disgorgement? We don’t know this yet,” he says.

He also hopes a new trading landscape with non-EU countries will help his company. But as he points out, the wine trade’s problems underline the enormous complexity Brexit poses for industries throughout the UK, the EU and beyond.

“We have no concept of what it’s like for the car industry, the computer industry, the wood industry or soft fruits,” he says. “Presumably there is the equivalent of the VI-1 scenario in all of them.”

Charts and illustrations by Ian Bott