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What is the impact of no deal on our farming industry?

FOLK2FOLK

Decisions being made about future trading arrangements with our biggest trading partner, the European Union, coincide with the start of the biggest reform of the farm support system since Britain entered the Common Agricultural Policy within Europe. We look at what the impact could be on Britain’s farming industry in the event of no deal.

While we wait to discover whether we’re dealing with a deal or no deal situation, and there’s still quite a bit that remains unknown, there are several things we do know. We know that direct support through the Basic Payment Scheme is being phased out over seven years and that by 2024, annual payments exceeding £150,000 to the larger farms will be cut by 70%.

We also know, with the Agriculture Bill now enshrined in law, that any future support through an Environmental Land Management Scheme (ELMS) will reflect a farmer’s ability to ‘deliver public goods’.

So, what are the potential impacts of a no-deal scenario on Britain’s farming businesses?

Land

Many people outside the realms of farming and landownership have an interest in land values. In the financial world, millions of pounds of borrowing are secured against land; all loans arranged through marketplace lender FOLK2FOLK for example are secured by land and property. So, could the outcome of the current EU negotiations have an impact on land values?

Long gone are the days when the price of farmland reflected its agricultural earning ability. The current annual trend of less farmland coming to the market continues with a market split many ways, especially between the genuine farming businesses wanting to acquire land to increase production and the continuing desire of individuals with funds wishing to own a patch of the countryside.

Will Parry, a Yorkshire based Land Agent, observes “Brexit remains an unknown and as we know, uncertainty affects business confidence. But this will pass once trade deals are agreed and new markets emerge.

“Fundamentally, land is in short supply. It offers the widest range of diversification opportunities compared to any other asset. It is a way of preserving wealth and passing wealth forward to generations. It will certainly play an important part in how we manage our land and environment in the future. The value of land has a bright future despite any short-term Brexit concerns.”

Beef and Lamb

A no-deal outcome without a trade agreement with the EU means we revert to WTO (World Trade Organisation) rules. Could no-deal adversely affect the red meat sector?

Potentially, yes, according to research by Hyber Cig Cymru-Meat Promotion Wales. Welsh red meat exports are worth £200m/annum with more than 90% of that trade being with the EU. The research suggests tariffs that could be applied in the event of no-deal could be in the range of 40%-80% depending on the type of cut.

Turning to lamb, the UK is one of the three main lamb producing countries in the world, alongside Australia and New Zealand. But whereas the ANZAC countries are net exporters, the UK is both an exporter and importer.

This means, the combination of tariffs and ‘payment for public goods’ could potentially result in a major de-stocking of the uplands. Within the sheep industry, it is generally recognized that lack of profitability of upland sheep farms would have the knock-on impact of destroying the stratification of the British sheep industry.

Could the need for land for tree planting to create woodland as part of carbon sequestration be more profitable than livestock farming? Does the renewed interest in staycation require our farms, in what are some of the most beautiful areas of the country, to offer accommodation and amenities rather than produce agricultural products?

British self-sufficiency

Perhaps we should shift the focus from producing for the export market and importing food, to producing for the home market. The UK is less than 60% self-sufficient in food. With so much competition for land, housing, infrastructure such as HS2, water storage, renewables and forestry, investment will be needed off-farm. Vertical farming methods, enhancing hydroponic production techniques, do not require land. Even growing food underground in London is possible. There are more varieties of cheese in the UK than in France. The UK is self-sufficient in liquid milk so why not produce more yoghurt and butter? And perhaps we could all be encouraged to eat British soft fruit in season.

Adapting to change

In five years-time we will no longer be talking about Brexit. Businesses will have adapted to whatever new trading regimes are in place and, as with all things: some will fail, some will succeed. But without a doubt, but there will be many, many opportunities that will be embraced by well-structured and well-funded businesses.

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