Three months to the day, Andersons, the UK agri-consulting business, hosted its last in the current series of seminars on the implications of Brexit for UK agriculture in London. The biggest threat to the UK comes from what replaces CAP direct support while the market is also threatened by exposure to imports through future trade deals. Ireland and France were identified as the countries outside the UK where the consequences of Brexit were most likely to be felt.

It was believed that Ireland would secure a deal with the UK on movement of people but any special deal would not extend to trade

It was believed that Ireland would secure a deal with the UK on movement of people but any special deal would not extend to trade.

As is usual with anyone commenting on Brexit, the vacuum of knowledge on what shape Brexit will eventually take means that all future projections are based on a series of assumptions on what future relationship the UK will have with the EU 27 when they leave.

The well known alternative trade arrangements were explored in some detail from the preferable Norwegian type model of being part of the economic area to the other extreme of trading under WTO rules.

Each of the close trading arrangements like the EU and Switzerland are thought to be most unlikely because they come with the condition of free movement of people.

Something like the Turkish common trade area would frustrate UK ambitions to make its own trade deals, which leaves the most likely option the negotiation of a specific trade agreement between the EU and UK. This would take considerable time and is thought unlikely to give the level of access to services that the UK wants as the EU is determined not to give "à la carte" benefits of the EU without the obligations.

Examples

The seminar went on to consider how what they considered a soft and a hard Brexit would impact on typical UK farms. It emphasised that these weren’t extreme examples. Rather they were at either end of the likely scale that the final arrangement would sit in. It was accepted that there was an immediate “Brexit bounce” across all commodities in the aftermath of the referendum and this is will be added to when the rate for the Basic Payments is announced in coming days. However, in the longer term post-Brexit it envisages each of the farm examples used will be worse off in 2025.

Listen to an interview with Richard King, Partner and Head of Business Research with Andersons, below

The soft Brexit model projects continued access to the single market and a cut in direct support payments of a third. The hard model assumes the UK trading outside the single market paying a tariff of sales to the EU and direct payment support cut by two thirds.

Beginning with what we would consider to be a large arable farm and assuming current exchange rates, a 600ha arable farm that will return £204,000 next year with continued direct payments, would drop to £143,000 in 2025 under the soft Brexit and to just £16,000 if there is a hard Brexit. A mixed livestock lowland farm which is currently delivering a business surplus of £105,000 (driven by £208,000 of subsidy), would drop to just £8,000 in 2025 under the soft model while the hard model would see a loss of £108,000.

Comment

While the absence of hard factual information places an undue reliance on assumptions it is clear that informed expectation in UK agriculture circles is not optimistic about the future support for agriculture. They also expect the market to be exposed to cheap imports with no hard information on how UK consumers are likely to react to high prices for domestic product. In any case it is difficult to foresee a market return in itself being sufficient to offset a reduction in direct payment support. UK farm lobby groups have plenty to do in the time ahead.

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