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Anglia Farmers article: Brexit - what now for the farming sector?


By: Justin Wright Date: 1 August 2016
Category: Press Release,Article,Agriculture

With all the hullabaloo and sound-bites of the referendum firmly behind us, it is fair to say that, at this time, sands are shifting in Parliament, divisions are becoming more evident within the UK, not to mention the uncertainty surrounding the financial markets. There is plenty more rhetoric to come from Europe and from within the UK establishment, but perhaps it is time to start looking forward to garner what all this means for the farming industry.

One of the largest unknowns pre referendum was the effect a ‘Leave’ vote would have on the sector’s ability to access central funding. CAP certainly had its critics but it is undeniably crucial to aid many farms to at least break-even. During these recent challenging years, the single farm payment and other European financial support has become a greater proportion of a farm’s total income. Once Article 50 has been invoked and the UK has successfully detached itself from the EU, CAP funding is gone and, if Donald Tusk is to be believed, there is no going back. However, it seems inconceivable that some form of financial support will not be available; Ian Duncan Smith has already indicated that some form of funding will be available. The questions are of course, what will this look like, how much will be available and does it adequately support UK Farmer Plc?

It is already widely accepted that food prices will increase. That will, in turn, mean that the cost of seeds, fertilisers, chemicals, contract costs, fuel etc, will undoubtedly start creeping up. To what extent, it is difficult to gauge; it will depend on a range of factors such as inflationary pressures, exchange rates and the ability to import competitively. The ‘drip-down’ effect is that the cost of production will potentially increase and, therefore, affect our competitiveness in markets abroad. This may be counter-weighted to some degree, as UK exporters should be winners, if exchange rates remain suppressed at these historically low levels. Within the UK, it is expected that the weekly food bill will increase (depending on who you listen to, this could be between 3-10%). Further down the line, essential spending on food by Mr and Mrs Smith will take more disposable income out of their pockets. However, farmers will contend that food has been under-priced and undervalued for too long but, the question remains, can the farm still return a profit?

One of the main resources available to the industry is the availability of EU labour. It has been in ready supply for many years and has been a part of the success of the sector. The hope and expectation is that those who are already employed within the sector should be able to continue to do so, although, at this present point in time, this is likely to be a negotiating point between the EU and the UK.

Going forward, without getting political, the ‘Leave’ campaign argued that, if the country requires a certain skillset, there should still be a fair system of identifying key workers through a points based immigration policy, to fill any void. Hopefully, any shortfall in agricultural labour is treated in the same way.

If the politicians are to be believed, although trade agreements already exist outside of the EU, it will be possible to maintain trading relationships within the EU to a large degree. It is fair to say that negotiations will be difficult with much gnashing of teeth but, it will be incredibly important that UK agriculture is well represented on all fronts after the exit. The EU represents the largest trading bloc and to have access on a continuing basis should ensure farming is in a strong position going forward.

Whatever the final outcome, the referendum result represented a momentous change in the direction of the UK. Many in the agricultural industry may prefer a quick exit rather than the protracted exit many commentators are predicting. There is uncertainty ahead and this uncertainty may feed market volatility, such as share prices, housing, exchange rates and inflation. However, with uncertainty comes opportunity and many farmers consider that in the long run, the ‘Leave’ vote will be good for farmers, but only time will tell.

If you would like to discuss how any issues detailed in this article may affect you, please contact me.
 
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