A Jackson Pollock canvas, a dizzying swirl of action painting, changed hands for a record £145 million in a private sale brokered by a Mayfair dealer this week. The figure, if confirmed in an auction setting, would smash the current record for any American artwork sold in Europe. Yet for those of us who watch the capital flows of the art market with the same hawkish eye we reserve for gilt yields, the headline conceals a more troubling reality: London remains a distant second to New York in the race for trophy assets.
The sale, facilitated by the blue-chip gallery Hauser & Wirth, reportedly involved an American tech billionaire as buyer and a European collector as seller. The price is eye-watering, no doubt. It represents a yield of roughly 12% annualised over the past decade for the seller, outperforming the FTSE 100 and certainly any government bond. But one swallow does not make a summer. The broader picture suggests that London's art market, much like its equity markets, is suffering from a persistent capital flight and a debilitating tax regime.
Consider the data. In 2023, London's total art auction sales reached £2.3 billion, a respectable figure but far behind New York's £5.1 billion. The gap is widening. The UK's decision to scrap the VAT retail export scheme in 2021 was a self-inflicted wound that sent a clear signal to international collectors: take your high-value items elsewhere. And they have. Hong Kong, Paris, and increasingly Singapore are competing for the business that once flowed naturally through Bond Street.
This Pollock sale is a conspicuous exception, not the rule. The buyer was willing to absorb the 5% import VAT paid on entering the UK, plus the 20% VAT on the dealer's margin. For many, these costs are prohibitive. Compare that with New York, where the import of art is tariff-free and sales tax is often negotiable. The result is a market distortion that favours the Big Apple.
There is also the question of fiscal responsibility. The UK government seems content to treat the art market as a cash cow, hiking taxes and piling on red tape. Meanwhile, New York offers incentives such as the resale royalty right exemption for works by non-US artists, which is far more generous than the UK's Artist's Resale Right. The message is clear: London is open for business, but only if you are prepared to pay a premium for the privilege of selling here.
The irony is that London still boasts the world's best infrastructure for art: world-class museums, a deep pool of expert conservators, and a legal system that protects title and provenance. But these advantages are being frittered away by short-sighted policies. The capital's share of the global art market has fallen from over 20% in 2010 to around 15% today. If this trend continues, the Pollock record will be a footnote, not a turning point.
What is to be done? The government should look at restoring the VAT retail export scheme, at least for items over a certain threshold. It should also review the stamp duty on premium properties that often serve as storage for high-value collections. Most importantly, it needs to signal that London is not just a market for heritage assets but a hub for innovation. That means supporting the growth of digital art and NFTs, which are currently taxed punitively compared to traditional art.
But perhaps the lesson of this Pollock sale is simpler. In a world of low interest rates and quantitative easing, the ultra-wealthy will always find a home for their cash. The £145 million is not a vote of confidence in London but a reflection of the buyer's desire to diversify holdings away from volatile equities and negative-yielding bonds. It is a safe haven purchase, nothing more.
Until the UK government addresses the structural disadvantages facing its art market, these record sales will remain isolated triumphs. The market will continue to follow the money, and for now, that money has a clear preference for New York. The Pollock may have fetched a record price, but the bottom line is that London is still playing catch-up.
