A UK exit from the European Union may not be beneficial for UK farmers, a new report by the Yorkshire Agricultural Society has claimed.
The 'Implications of BREXIT for UK Agriculture' report identifies a number of issues that need to be clarified in the Referendum debate and develops different scenarios that may arise in the event of an exit and how each of those have different implications for farmers.
The British Government is in the process of negotiating a new settlement for the United Kingdom (UK) in a reformed European Union (EU). The plan then is to hold an in-out referendum, before the end of 2017, on the UK’s continued membership of the EU. This report examines the options that would be available if it is decided that the UK should leave the EU (BREXIT).
For example, it considers whether the UK would be able to maintain a customs union with the EU, but notes that such a model may not be acceptable to opponents of EU membership. It considers the existing Norwegian and Swiss models but dismisses both on the basis of the UK having to follow a large body of EU rules with no influence over how they are agreed.
The Society concludes that a simple free trade agreement with the EU is probably the UK’s most preferred option, but that this may be difficult to achieve. If no agreement on an FTA is possible then the default position would be for the UK and EU to trade with each other within the WTO system.
The UK is not a big player in terms of international agricultural trade, so it may be that as part of the UK’s attempts to obtain more favourable trade terms than through the WTO in other sectors, the conditions for UK agriculture would be less generous than they are at present in terms of lower import tariffs and more generous market access commitments.
The report also looks at the likelihood of changes in the UK approach, post BREXIT, to farm support and agricultural legislation covering the environment, animal health & welfare, plant protection products, migrant labour and GMOs.
For GMOs, it is found that the system would become even more fragmented. For migrant labour, Herefordshire is found to be the most reliant county in the UK, having taken up 20% of the SAWS work cards in the past, followed by Kent, Cambridgeshire and Angus. Moreover, it finds that it is very unlikely that the UK will either wish, or be able to substantially weaken its existing provisions in animal health, welfare and plant protection.
It concludes therefore that the regulatory burden might not be reduced as much as farmers might hope and in any event would take many years to achieve. Outside of the EU, it argues that environmental, conservationists, consumer, public health and animal welfare lobbies would continue to be influential and to exert pressure for more stringent regulation of agriculture.
The Society finds that it is likely that there would be some reduction in the medium term to the level of support available to farmers and that direct payments would be most vulnerable. It notes that the 2005 Treasury / Defra Vision on the future of CAP support states that government policy would be to abolish direct payments and that spending would be based on the current pillar 2.
UK farming 'hampered' by EU membership, says former Environment Secretary
However, former Defra minister Owen Paterson said farmers would in fact benefit from leaving the EU as they would be free from EU directives and subsidy policies.
Paterson said money could be better used in a targeted and efficient manner.
"I believe that the United Kingdom has a great future beyond the political arrangements of the European Union," Paterson said at the Oxford Farming Conference.
"Agriculture and food production is hampered by our membership of the Common Agricultural Policy. CAP negotiations between 28 countries inevitably mean that we have to accept compromises, these are at best deeply unsatisfactory and at worst actively damaging to UK farmers."
The NFU President insisted that the referendum could completely change the way agriculture operates.
Shadow Defra secretary Kerry McCarthy voiced concerns that the only reason the UK wants to stay in the EU was due to "jobs and investment" rather than real issues in farming, the environment and animal welfare.
Ms McCarthy criticised the Environment Secretary's stance: “It is very narrowly focused – I think we need to look at the Defra side of it far more. I agree that there ought to be a team within the department looking at it. If people were to make an informed decision, then that work needed to be done."
Andrew McCornick, NFU Scotland Vice President commented: “Put simply, the interests of agriculture in Europe are clear – farmers would prefer to farm without the financial support they receive from the EU, but the reality is that most farms don’t make enough from the market for this to be possible.
“The role of direct support in overall Scottish farm incomes is complex but invaluable. Any drop in, or removal of, direct support could lead to a significant number of Scottish farm businesses hitting barriers and will remove the ‘multiplier’ effect of the farmers’ pound, to the detriment of the food sector and the wider rural economy.
“A further issue is access to the European single market, which allows tariff-free trade amongst all member states. The EU’s negotiating position has also allowed trade agreements to be opened with some 50 international partners in recent years. This is of great importance to Scotland’s food and drink industry, which continues to exceed targets and had an export value of £5.1 billion in 2014.
“Whilst issues within domestic supply chains are currently hindering primary producers’ ability to receive an equitable share of the retail price, it is vital we continue to build on the prominence of Scottish food and drink in key export markets both in and outside of the EU, and indeed enhance trade with our neighbours in the rest of the UK.
“For farmers to vote to leave the European Union, they need to know what the trading arrangements with the rest of Europe would be – would Scotland be able to continue to trade tariff-free with Europe or would our lamb, beef and other key farm exports face a tariff barrier? Would access to important overseas markets remain or would the UK have to start over again in negotiations?
“Access to markets is vital and clarity is required on what this would look like should the vote be to leave the European Union.”
'Significant effects'
Tim Lang, Professor of Food Policy at City, said a UK exit could have significant effects on the food industry, agriculture, supply chains and public health policy. However, the food implications of leaving the EU have rarely been raised in the public debate so far.
Lang said: “Food and agriculture are central elements in the EU structure, yet they have barely been raised in the Brexit debate so far. Big food companies are nervous about supply chains being destabilised, while farmers and growers are worried about how their exports may be affected.
“These wide-ranging potential implications are among the critical issues that the 2015 City Food Symposium will address. This is a chance to inform and shape debate by providing analysis and data from experts across a wide range of disciplines.
“Polls of public opinion show diversity and some uncertainty about what our future relationship with the EU should be. Some hanker after pre-common market days, or fear creeping EU control and interference from Brussels.
“However, UK food production has been quietly declining for years and the gap between imports and exports has been widening – it is currently estimated to be around £21 billion in deficit. It is therefore vital that, with our health, jobs, food businesses and policy all firmly linked with the EU, we fully understand how leaving it could affect our country.”
Farm incomes
A UK exit from the EU could have a significant negative impact on farm incomes and land values, according to a report by Savills.
The referendum on membership of the European Union (EU) presents the greatest uncertainty for UK real estate in 2016/17, according to Savills; the outcome having potential implications for all three sectors. The prospects for a pre-referendum investment slow down may well depend on how close polling companies believe the outcome will be.
Existing pressure on farm incomes is unlikely to lead to a significant increase in the supply of farmland unless there is a threat to direct farm subsidies from a UK exit from the EU or a significant negative change to the capital tax treatment of farmland.
Rural estates remain attractive to high net worth buyers as safe shelters for wealth that they can also enjoy; they are also partially protected from commodity price volatility having a diverse asset base and multiple sources of income generation.
Mark Ridley, Chief Executive Officer, Savills UK and Europe, says: “Next year UK real estate will move into a new stage of the property cycle and will also face a number of ‘known unknowns’: an in-out EU referendum within the next 18 months, new regulation coming into force, and a potential end to more than six years of record-low interest rates, resulting in a very different year to 2015.
"As we’re unlikely to see a repeat of the strong capital growth witnessed recently, we’re predicting that investors’ attention will turn to maximising rental growth and income returns.
"There are still numerous opportunities across all the sectors we’ve explored, however, particularly outside the capital, and we expect to see the shift towards investment in the regions that began this year to strengthen in 2016."
In the short-term, demand for farmland will be more localised. Non-farmer demand, and the expected growth in prime country residential markets over the next five years, will continue to support prices especially on residential and amenity-type farms, but investor demand may weaken as the performance of alternative assets improves.
In the light of recent market evidence and the short- to medium-term expectations for commodity prices and therefore farm profitability, we have downgraded our forecasts for the next five years: we expect values to be much more varied than those of the past five years.
This market will last three to four years until commodity prices start to recover, following stronger global growth. However, the fundamental factors driving UK farmland value growth remain. Supply is historically low, the product is finite, and competing land uses and ownership motives will all support farmland value growth in the long-term.
