How might Brexit impact the UK’s agricultural industry?
As the UK moves closer to the exit from European Union (EU) membership, the farming industry awaits answers to many questions. The referendum decision will result in the greatest influence over this sector since joining the EU 40 years ago.
Through the formation of the Common Agricultural Policy (CAP), UK agriculture has benefitted from a support mechanism enabling it to invest and spread wealth throughout the rural economy. Minister of State for Agriculture, George Eustice, has announced farm subsidies will be replaced with a system that sees UK producers paid for carrying out positive environmental measures. The government has committed to maintaining levels of direct support until 2020; however the inevitable overhaul post Brexit has produced insecurity about future funding and is one of the largest concerns to UK agriculture.
The Basic Payment Scheme (BPS) is the biggest of the European Union’s rural grants and payments to help the farming industry. The decision to purchase new large machinery has often been dependent upon receiving the BPS (previously the Single Farm Payment). The importance of this subsidy cannot be underestimated. For farmers, the ability to pay directly for machinery or other services means that they can select suppliers and directly affect the local agricultural economy. It is reported that the rural economy is made up of 650,000 businesses employing 3.4 million people and generating £229 billion to the national economy1. Should the BPS be changed negatively the consequence could be a reduction of suppliers servicing the farming industry. This in turn could affect the face of the rural population and community.
Uncertainty about the future direction of the agriculture industry is nothing new. Farming is a highly adaptable industry, having seen massive changes through the industrial and technological revolutions it will now have to rise to the challenge of a massive political shift. Without doubt, change is now firmly on the agenda; depending on those changes the fittest and most flexible businesses will potentially be in a stronger position to adapt quickly and continue to succeed. Whilst they may have the greatest direct subsidy to lose they are also more sustainable and often have the deepest pockets to maximise opportunity as it arises.
For smaller family businesses a cessation to direct payment subsidies would likely have the greater impact. For many smaller businesses it has been the difference between a profit and a loss. Indeed, without the direct payment there are question marks over the ongoing competitiveness of some UK family farms against a subsidised EU. Again, it is important to recognise the role of smaller farming businesses on the rural economy as a whole, likening it to a house of cards – if you pull away the foundations the whole house falls down.
With trade deals yet to be broached, there is growing concern about what challenge UK farming faces in respect of tariffs. The UK’s trade arrangements are presently defined in EU law. Upon leaving the EU they will pass into UK law with tariffs set by the EU. As most food imports come from the EU, food prices are predicted to rise. To offset this, the UK government may impose a unilateral reduction of tariffs, but in doing so it will become easier for other countries with lower standards to supply the UK.
No one can ever be absolutely certain of what the future holds and a challenge can also been seen as an opportunity. Complacency isn’t an option for the farming industry, reviewing best practices and becoming the most efficient version of itself is the way to thrive in the brave new world outside of the EU.
1. CLA (Country Land & Business Association) 2016 - Leave or remain: the decisions that politicians must make to support the rural economy.