In the 17 months since the referendum, the number of Brexit related reports, articles, conferences and opinion pieces has continued to pile up. It would be easy to get lost in the noise.

There was one report published recently, however, which should make readers of the Irish Farmers Journal sit up and take notice. The European Parliament released a report on the impact that Brexit might have on Europe’s agri food landscape. For the Irish food industry the report makes sobering reading.

The authors look at the worst case possible Brexit scenario. In this scenario the divorce goes poorly; the UK leaves the EU on a ‘cliff edge’ and there is no free trade deal (FTA) agreed. The UK would fall back to trading on World Trade Organisation terms (meaning heavy tariffs on food) and does not agree an FTA with the EU this side of 2030.

This isn’t the most likely scenario currently, but the idea has real currency among a growing number of hard line Brexiteers. While our best hope is that economic interests win out in the end, it is far from clear that they will. The Brexit debate in the UK is now mired in divisive domestic politics and the final destination for all involved is unknown.

If the worst comes to worst, the picture painted by the European Parliament’s report is not pretty. They estimate that Brexit could permanently wipe up to 9.5% off Irish GDP. That is about €11,000 annually in output for every worker in the country. While GDP may seem a distant concept, the impact would be catastrophic and would upend life in rural Ireland. The report looks at detailed impacts for different categories of food and drink, but the key takeaway for readers is this – in this worst-case scenario the authors expect that we would witness an almost complete wipeout of Irish meat and dairy exports to the UK.

It is worth re-stating this is not the most likely outcome, but the risks of a divisive outcome are growing rapidly. Let’s hope that we don’t get to test their analysis.

Additional costs

Looking past the dramatic headline, the report does a good job of drawing attention to two other important issues.

Firstly, it shows that because we rely more than others on the UK for inputs to both primary agriculture and processing (about 10% of total), the imposition of additional costs on trade will significantly increase the cost base for the Irish agri food sector.

Secondly, the report points to the fact that with the UK outside the EU’s customs union, the cost and time it takes to get Irish produce to contenintal Europe through the UK will increase significantly. This is due to both customs delays and veterinary checks which can take several hours.

The alternative is a 20-hour ferry journey to Cherbourg, which is double current journey times. In low margin industries with perishable products, delays matter a lot. The European Parliament’s report estimates that this could knock up to 5% off gross margins in the sector.

Add these additional costs up and the authors think we won’t just lose trade to the UK, but we will lose out in the EU and other markets as well. Up until now the policy debate has focused on diversification, but this report does us a service in bringing some hard facts to how difficult that may be.

Slow market development

Loss of UK market share, where it occurs, is likely to happen relatively quickly, whilst analysis in Ibec’s upcoming economic outlook will show that replacing lost food exports would take five to 10 years at current rates of market development. There are reasons why the UK has always been attractive for Irish producers – it’s close, has a large population and they have similar tastes. In contrast, building new markets involves considerable risk and expense. Even within the single market, companies face barriers in establishing commercial relationships and supply-chains.

In addition, they must build cashflow, innovate and invest to tailor products to consumer tastes and deal with new regulatory regimes. The further goods travel the tighter margins will be as transport costs increase. Significant resources will be needed to help companies meet these challenges.

It is imperative that all sides of the sector work together to ensure our European partners understand the need to avoid a calamitous Brexit. The UK is the route to market for 90% of agriculture output on this island and any loss of that output would decimate farm incomes.

Without a joint effort Irish industry will have some uncertain years ahead.