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Julian Agnew, the sixth generation chairman of the firm, told ATG: "We are neither the Tesco's of the market like the big auction houses nor a small dealer with only an assistant and a dog who can run on very low overheads. We're in the middle market, which is very difficult.

"Changes in the market and technology make a gallery no longer necessary unless perhaps you are a big Contemporary art business."

Once a major force in the Old Master market, the gallery's fortunes have faltered in recent years in a changed marketplace. In 2008, Agnew's Bond Street premises, purpose-built by Julian Agnew's great great grandfather Sir William Agnew in 1877, were sold for a reported £25m and the gallery announced its intention to downsize its Old Master department to concentrate more on Modern and Contemporary art at the new Albemarle Street space.

The "entirely voluntary" decision to close the gallery was taken by the 16 family shareholders, only two of whom, Julian Agnew and Christopher Kingzett, still work at the firm. The business is not in debt and, as there are still 12 years left on the lease for the Albemarle Street gallery, they are looking to assign the lease.

"It's the correct decision, although tinged with sadness," said Mr Agnew. "But better to recognise that the marketplace has changed than drag on in a miasma of gloom. I'm 70 and I want to have a quieter life. I will continue to look after 20-25 of my best clients, both buying and selling, until they or I stop or die! But these habits die hard and I love looking at works of art so I will continue to keep a close eye on the market."

Talks to sell the company fell through last year and the firm has since been running down both stock and staff gradually, leaving only six employees now, including Mr Kingzett and Mr Agnew.

Mr Kingzett has not yet decided what to do next, but Mr Agnew said he plans to continue dealing.

Changing Marketplace

"It used to be that the auction houses were the wholesalers and we dealers were the retailers. But now they offer everything we can offer including privacy thanks to their private treaty departments," said Mr Agnew.

"I think all dealers are undercapitalised for today's market of multi-million-pound lots," he added. "If you don't think a model of business is working any more, the best thing to do is acknowledge it. We can now give the shareholders money to go on and spend on new businesses, or do as George Best did and spend it on wine and women!"

The increasingly short supply of good quality stock within the Old Masters market has also contributed to the decision to call it a day: "I don't want to deal in secondary Old Masters," said Mr Agnew, speculating that some of his Old Master dealing contemporaries may soon follow him into retirement and that few younger dealers are entering the field.

His daughter, Gina left the gallery last year and started her own Contemporary art business, so the seventh generation is keeping the family name going in the industry, albeit in a different guise.

Although stock has been run down, Agnew's have secured some good items on consignment for their final TEFAF.