The Impact of BREXIT on the Agricultural Sector
There will be far reaching impacts on the agricultural sector due to the United Kingdom’s decision to leave the European Union. Questions have already been asked surrounding subsidy payments, stewardship arrangements, land prices and the value of British produce and the resulting impact that this will have on consumers.
The country awoke on that Friday morning to hear the announcement that the UK had narrowly voted for Brexit. We now have considerable turmoil with a leaderless Government, following the resignation of the Prime Minister, and a rudderless opposition. When we trigger Article 50 is not known. There is no plan for the country let alone UK agriculture. There are calls for a General Election to elect a new Government. The incumbent, right of centre, Government will likely view the industry very differently to those left wing if only for the votes that they perceive to be available.
The NFU have already urged the Government to ensure that a comparable level and form of support should continue to be allocated for farmers. The current Common Agricultural Policy (CAP) represents 40% of the EU budget and it is questionable whether any future Government would commit to an amount of this equivalence being spent on agricultural subsidies. The Royal Institution of Chartered Surveyors has provided figures which state that 55% of farm income currently comes from CAP and 70% of farm profitability is dependent on EU support. Given current commodity prices this will have understated the case.
The current Basic Payment Scheme (BPS) should not be influenced by Brexit, whilst the UK is still within the EU, but it will be the responsibility of Government to ensure that British agriculture is competitive and financially sustainable particularly if there is pressure on reducing subsidy levels. EU subsidies contribute towards environmental improvement, through Countryside Stewardship Schemes and it is expected that Natural England will provide clarification before expecting farmers to enter into the next 5 year agreement.
The value of farmland is expected to be maintained and it is possible that more land will come to the market with some landowners wishing to clear their hand in a time of some uncertainty.
The NFU President, Meurig Raymond, has warned that consumers in the UK should expect to see food prices increasing, due to the dependency the country has on imports with some 70% of food imports coming from the EU. The impact of this will be dependent on whether or not a deal can be struck for the UK to remain within the Single Market, but participation of the Single Market requires the free movement of people, so this might be hard to swallow for some in the ‘Vote Leave’ camp. British farming produces 61% of the food that is consumed in the UK, therefore new trade deals relating to imports will need to be agreed, with no realistic prospect of the nation becoming self-sufficient. The NFU have stated that restrictions should be placed on imports that do not comply with UK standards and that a tariff for imports outside of the EU should be maintained.
The export market could also be influenced by the Brexit decision due to 60% of all food exports going to the EU. However the impact that has already been seen on the exchange rate and resulting weaker pound could enable UK produce to be viewed as more affordable, at least in the short term.
The future for the entire agricultural industry will be uncertain in a post EU world. Plans are still to be drawn up which will formally indicate and advise the way in which the industry will be shaped and will move. It will be the responsibility of the UK Government to create a strategic plan and the sector will look towards DEFRA to ensure interests are safeguarded and prioritised at Westminster.
For more information contact James Walton or other members of the Rural Land Agency department on 01789 292310.