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News & Press: IOE&IT News

UK farming profits would be halved by worst-case Brexit

11 October 2017  
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sheep in a field

The Agriculture & Horticulture Development Board (AHDB) have given a gloomy outlook for British farming should a cliff-edge Brexit take place. It estimates that a ‘worst-case scenario’ would cut average farm profits from £38000 per year to just £15000 – as much as half. 

Using a model that took into account various supply chain costs such as imported parts and reduced subsidies, as well as increased costs in labour without the freedom of movement for EU workers, the AHDB research concluded that a trade agreement with the EU will be vital for the industry. 

Currently the UK’s agricultural and horticultural industries receive subsidies from the EU’s Common Agricultural Policy. In superficial terms, UK farmers receive £3.1 billion a year from the policy, though the UK government has said it will aim to maintain the same level of overall farm subsidies until 2022.

Three possible outcomes

According to the BBC, the research looked at three possible outcomes for Brexit:

  1. ‘Business-as-usual- in terms of subsidies and the current trading climate, with average annual profits potentially even growing to £41000
  2. A reduction in subsidies and tariff-free access to the UK’s produce, which could see average profits fall to £15000 – the worst-case scenario
  3. A cliff-edge Brexit with WTO rules bought in, a substantial cut in subsidies and new tariffs whereby average annual profits could fall to £20000

The AHDB is quoted as saying that Brexit will inevitably have a ‘dramatic immediate impact’ on the industry.

Increased labour costs

The effect will be uneven though, with dairy and pig farmers set to benefit from rising prices. But significant exporters – including sheep farmers and cereal producers – would be hit by the increased costliness of exporting post-Brexit.

Furthermore with 50,000 to 80,000 EU nationals relied upon currently for labour in the industry – fluctuation with seasonal peaks – more stringent labour rules could hit the industry particularly hard, increasing costs through items like visas and increased reliance on domestic staff. 

Unlikely situation?

A spokesman for DEFRA told the BBC that the worst-case scenario bought up by the AHDB is an unlikely one. 

"This report is based on hypothetical and highly unlikely scenarios that do not reflect the government's negotiating position,” they said. "Outside the EU and free from the bureaucracy of the Common Agricultural Policy, our farmers will be able to focus on growing, selling and exporting more fantastic produce."

Formal trade negotiations with the EU are yet to begin as talks remain locked in the first stage that seeks to resolve issues like EU citizens rights to remain in the UK and the Irish border. Agricultural policy – as one of the most significant aspects of membership in the EU as a trade bloc – will likely be one of the most hotly debated issues of any trade deal negotiations between the UK and the EU.

Sources

BBC News: 'Farm profits may halve after Brexit, says report' - 11 October 2017

AHDB: 'Brexit scenarios: an impact assessment' - October 2017