Calls for ‘common sense’ after Brexit
AFARMING union has called for “common sense” to prevail over whether Britain should continue to be a member of the single market and the customs union after Brexit.
The Farmer’s Union of Wales (FUW) said the evidence supporting the need for the UK to remain in the single market and customs union is now “incontrovertible.”
It comes after a report last week presented a grim warning of the impact on Britain’s farms that leaving the EU without a comprehensive free trade agreement in place could have.
The report by the Agriculture and Horticulture Development Board (AHDB) said that upland sheep and cattle farms – which make up half of Wales’ agricultural holdings – would suffer particularly badly if the UK was forced to revert to trading under World Trade Organisation (WTO) rules.
FUW president Glyn Roberts said: “Continuing membership of these two institutions [the single market and customs union] is the only way to avoid the dire collapse in incomes predicted in the latest AHDB report and in the FAPRI report in August.
“Talks with the EU about some kind of alternative arrangement have not even begun, yet we only have around seventeen months before we leave the EU.”
The latest AHDB Horizon publication released last week reported the results of detailed modelling of different Brexit scenarios.
The document highlights the risks faced if Britain leaves the EU without easy, tariff-free access to the single market, with less favoured area (LFA) livestock farm incomes particularly hard hit, falling to negative figures in the worst case scenario.
Lowland livestock farms fare little better, with incomes falling to less than £4,000 in two of the three scenarios looked at, and across all UK farm types, incomes more than halve under an ‘extreme’ Brexit scenario.
Last week the National Assembly for Wales debated the impact of Brexit on Welsh ports, with Assembly Members hearing that Welsh ports lack the physical capacity to accommodate new customs and border checks.
And in August a Welsh Assembly report highlighted that lengthy delays, tailbacks on Welsh roads and disruption to freight supply chains could become the norm as a result of leaving the customs union.
Mr Roberts said that even where agreement had been reached with the EU other WTO members had objected, highlighting the dangers the UK would face in leaving the world’s biggest free market and attempting to negotiate with WTO members.
“The EU and UK sent a letter last week to WTO members outlining an agreed position on how quotas should be split when the UK leaves the EU, but the USA and other WTO members, including Canada, Argentina, Brazil and New Zealand, had already written to the EU and UK WTO ambassadors stating their objections to the proposals,” added Mr Roberts.
“The letter, signed by seven of the WTO’s 164 members, states: ‘Such an outcome would not be consistent with the principle of leaving other [WTO] members no worse off, nor fully honour the existing TRQ access commitments. Thus, we cannot accept such an agreement.’”
Mr Roberts added: “This underlines the fact that the current EU negotiations are just the start of a complex process that would normally take decades.
“Almost daily we are seeing developments that reinforce the message that the only sensible outcome is to ensure we are still members of the common market and customs union on the day we leave the EU. Once that is accepted, the majority of the dangers, challenges and uncertainty just disappear,”
NFU Cymru president Stephen James said: “The UK Government must ensure that the industry does not face a devastating cliff edge Brexit at the end of March 2019, by ensuring that we can continue to trade with the EU, unfettered by tariff and non-tariff barriers.”
MORE than a half of Welsh farms could be at risk if Britain leaves the EU without tariff-free access to the single market, according to a new report.
Wales’ upland sheep and cattle farms could be particularly vulnerable if the findings in the report are borne out.
The study by the Agriculture and Horticulture Development Board (AHDB) looks at the impact on UK farm incomes of three different post-Brexit scenarios.
They range from gradual change under a comprehensive free trade agreement with the EU in the first scenario, to a unilateral opening of borders to overseas producers in the second and reverting to World Trade Organisation (WTO) rules in the third.
Reverting to WTO rules could have a serious impact on Welsh farmers because it would reduce Welsh lamb exports to the EU. This would mean farmers trying to sell more of their lamb in the UK market, driving down prices and farm income.
And opening Britain’s borders to overseas producers such as New Zealand and Australia could have an equally serious effect by flooding the market with cheap imports.
The second and third scenarios also assume changes in farm support payments, higher labour costs due to restricted migration and changes in regulations along with the altered trading arrangements.
The report found that average farm profitability across the UK could drop from £38,000 to £15,000 a year in the second scenario, putting many farms in the weaker categories at risk.
Trading under WTO rules would also see a fall in average farm income to £20,000, while the gradual change scenario would actually see a slight rise to £41,000.
Wales is particularly vulnerable to downward pressures on farm income. According to 2015 figures, more than half (54%) of agricultural holdings are under 20 hectares, and 44% of active holdings are cattle and sheep farms in less-favoured areas (LFA) – a total of 10,805 farms.
Although the results are not broken down by nation, the report says farm income among LFA beef and sheep farms would fall by half under the open borders scenario, and collapse into negative territory under the WTO scenario.
And small farms in all sectors are considered to be most at risk by the report.
“The future prospects for the sheep and beef LFA producers look especially challenging under this scenario; only the most efficient producers will be economically viable without off-farm income,” say the authors.
According to the report, the gradual change approach would make little difference to upland sheep and cattle farms.
But under the second scenario farm incomes would be halved, mostly because of a big drop in sheep prices after the opening of Britain’s borders to producers in countries such as Australia and New Zealand. “Sheep enterprises will be under the greatest pressure,” says the report.
And if Britain reverts to trading under WTO rules under the third scenario, a fall in the value of sheep production is compounded by a 75% cut in farm support payments to send net farm incomes into negative territory.
Besides hill farms, the other most common types of farms in Wales are lowland cattle and sheep (2,079 farms) and dairy farms (1,744).
Lowland cattle and sheep farms would not suffer quite so badly as upland ones under scenario three, mostly because a rise in the value of beef offsets the fall in sheep prices.
But under the open borders scenario they would actually fare worse than upland farms, with average net incomes falling to under £3,000.
This is because they get less benefit than hill farms from agri-environment and rural development payments that are expected to rise to some extent to compensate for the end of direct payments under the EU Common Agricultural Policy.
It could be good news for modern, large dairy farms of the sort that are springing up in places like Pembrokeshire, because they stand to gain
from reverting to WTO rules. According to the report, their incomes could rise by as much as a third under WTO rules, and almost as much under the EU-free trade scenario. This is because imports of milk from Europe and elsewhere become more expensive (even imports from the EU become more expensive after leaving the single market).
But under the open borders scenario, incomes could fall by more than a third due to the end of CAP direct payments and a rise in labour costs.
This could pressure on the smaller and less efficient farms, leading to an accelerated trend towards larger and more efficient units.
Other farms could be in trouble too. Upland sheep and cattle farmers are not the only ones who could suffer under post-Brexit arrangements. The report shows that cereal farms which are few in Wales but common in lowland parts of England - could also be pushed into negative territory under WTO rules, largely because of changes in farm support and the high costs of labour on cereal farms.
“Across UK agriculture, cereals and upland beef and sheep producers account for a large share of producers and land use. The results show that it is these producers who, on average, will be most impacted by drops to farm business income,” the authors write.
The report looks at how farms in different sectors would fare, assessing the impact of each scenario on farms of different size and performance.
In each sector it finds that the largest farms and the ones with the best performance fare best while the smallest and least productive are most at risk.
The authors write: “Perhaps the most significant message from this research for farmers is that high-performing farms are shown to be in a far stronger position to cope with the changes associated with all three scenarios…
“High performance is not necessarily associated with larger farms, and there is the possibility of improving performance across the size spectrum. This is something that farmers can do now, with support…”
Farming unions said the report bore out their warnings of the dangers of leaving the EU without a deal that ensures tariff-free access to the EU. Farmers’ Union of Wales (FUW) president Glyn Roberts said: “The Horizon report reinforces the predictions we have seen in the recent FAPRI report and underlines the danger the agricultural sector finds itself in, should the worst case scenarios become a reality, these are all dangers the FUW has long highlighted.
“This report suggests that in some parts of Wales more than 50% of family farms would go out of business, with enormous knock-on implications for wider rural economies.
“However: this is avoidable if governments, and in particular the UK Government, take the necessary action to ensure that markets are not lost and livelihoods are protected.”
NFU Cymru president Stephen James added: “For some time now, NFU Cymru has been warning about the devastating impact that leaving the EU without a trade deal would have on Welsh agriculture, particularly in the more export orientated sheep and beef sectors.
“Today’s report from the AHDB very much bears out those concerns about what would happen if we were to find ourselves in the perfect storm of having to trade with the EU27 on World Trade Organisation (WTO) terms, seeing third country imports coming into the country, and facing reductions in support payments.
“The UK Government must ensure that the industry does not face a devastating cliff edge Brexit at the end of March 2019, by ensuring that we can continue to trade with the EU, unfettered by tariff and non-tariff barriers.”