Farmers keen to reap Brexit rewards, but risks remain
Farmers’ hopes of greater market access are tempered by subsidy uncertainty, writes Iain Withers
Cheaper food for British consumers, greater access for UK farmers to huge markets like the US and Brazil, and an end to the EU’S much-maligned common agricultural policy (CAP), with state support redirected to the food producers that really need it.
That is the picture painted by Brexit optimists of life for UK farmers after March 2019, or at least whenever any transition arrangements end.
But it also throws up potential headaches for the £109bn food and drink sector, which employs 3.9m people and acts as custodian of swathes of the British countryside.
Agriculture, perhaps more than any other sector of the economy, will face draconian European tariffs if no trade deal is struck. Eye-watering levies on British produce would include 45pc-64pc surcharges on lamb, 81pc on milk, and 92pc-112pc on beef.
The UK may get access to cheaper products from giant overseas suppliers, but there are fears these could come at the cost of lower standards. Will the price of trade deals be allowing imports of chlorinewashed chicken, or hormone-growth boosted cows?
Then there is the threat of reduced access to European labour. Farmers rely on 80,000 seasonal workers a year, mainly from the east of the continent, to pick fruit and vegetables. The supply of workers is beginning to wane ahead of the UK’S exit; according to the National Farmers’ Union (NFU), there is a real danger produce will be left rotting in fields.
And while widely criticised, the CAP provides a lifeline for many uneconomic British farms. The Government has guaranteed it will make up for any shortfall in subsidies at least until 2021, but there are fears for what would come next. So how can the sector mitigate these concerns and capitalise on the opportunities?
This month the NFU became the latest trade body to shout loud and clear for a transition period after Brexit, during which it wants the UK to remain in the customs union and within Europe’s external tariff area.
“We look at Brexit as having both challenges and opportunities,” says Nick von Westenholz, the NFU’S director of EU exit and international trade. “But there’s nervousness about the prospect of a cliff edge. If we were to come out of the EU without transitional arrangements, that would be very disruptive.”
The NFU believes Brexit could provide the UK with the kick it needs to become more self-sufficient in food production. The country produced 80pc of its own food just 30 years ago, but now that is down to 60pc.
“We don’t consume enough of the food we produce, we should look to increase that,” says von Westenholz. “It may be the Government can promote British food more readily than it could under EU state aid rules.”
When it comes to CAP, agriculture industry experts welcome the Government’s commitment to subsidies, but are wary about future policy. Steve Thomson, senior economist at Scotland’s Rural College, points out that sheep and cattle farmers are particularly reliant on subsidies, notably in remote areas such as northern Scotland, and many would go out of business were levels of support to change.
He is concerned the Government has only made a commitment to continuing income support for farmers, and not EU rural development funding, which is currently matched by the Treasury.
Michael Gove, the Environment Secretary, insists the Government will be able to allocate subsidies more sensibly than Brussels, with a shift from the current system of generally awarding grants by size of farm to incentivising protection of the environment and innovation in production methods. Industry watchers suggest the UK could follow an example set by New Zealand, which abolished farming subsidies in 1984 and – after two or three years of pain – ultimately doubled productivity. Britain’s farming productivity has barely grown a quarter over the same period. However, New Zealand is thought to have benefited from its proximity to a booming Asian market.
Cheaper food is one of the potential big draws of Brexit – buying food at world prices rather than at EU prices could cut British grocery bills by 17pc, according to the OECD.
While Europe does import a lot of British food, in particular lamb and beef, food trade barriers might bite us harder, according to Sean Rickard, an independent economist specialising in the agriculture sector. “We Brits tend to import specialist cheeses and fine wines from Europe. You could argue those consumers won’t be worried about that last 10pc in price. Whereas our exports to Europe tend to be more commodity based,” he says. Rickard can see that there might be opportunities in exporting to countries that were previously tough to trade with under EU rules, such as Middle Eastern nations.
But he says crashing into WTO trade rules straight away in March 2019
Buying food at world prices rather than EU prices could cut grocery bills by 7pc, according to the OECD
would be “chaos” due to the high tariffs with Europe. He predicts that while food will be cheaper outside the EU, this could have a knock-on effect on the size of the UK farming sector. “Outside Europe it will become more efficient, more competitive, but probably smaller,” he says.
Immigration is another area of concern. A survey by the food sector’s Association of Labour Providers earlier this month found that 30pc of agencies did not expect to be able to recruit sufficient workers for the remainder of the summer, while 45pc expected shortfalls for the Christmas peak.
However, Thomson says British farmers are not hitting the panic button just yet: “I think people are looking at their businesses and looking at alternatives. But I don’t think people will get out until there’s more clarity. They’ll knuckle down and get on with what they’re doing.”