Brexit dominates the news even a year and a half after the EU referendum; hard Brexit or soft Brexit? Customs union? Single market? Transition period? It is even more dominant in the agriculture world, given how reliant UK farming is on trade with the EU. The government has quite the task on their hands – negotiating our entire trading relationship with the EU as well as trying to work out new deals worldwide, all while adhering to the standards and regulations of both. It is essential that UK farmers and agribusinesses know what the potential impact of Brexit will be on their business.
EU free movement of labour
The first main area of impact is on agribusinesses that rely on EU migrant labour. In the EU, currently, labourers can move between the rest of the Union and the UK with no visas. It is reported that 95% of all berries picked on UK farms are by non-UK labourers. Once Brexit takes effect, movement will be more difficult for these workers and it is expected that the number of seasonal farm labourers will drop dramatically. It seems to have already begun, even though we haven’t left yet – last year, it was reported that many seasonal labourers had snubbed the UK, with farms being almost a third short of workers in September.
To avoid more instances of fruit being left to rot in the fields, farms will have to rely on non-EU labourers, unless the UK government gets a deal on farm labourers with the EU. Frictionless movement between the UK and the EU is essential to the continued use of seasonal labourers from EU countries.
Thousands of UK farmers rely on EU subsidies like BPS to survive. In fact, some even take in more money from subsidies than they make from agriculture. This is an essential part of our relationship with the EU. Michael Gove’s speech in January confirmed that BPS will be phased out over a period of a few years after 2022. Following that, the system is reported to be changing – the current system grants farmers subsidies based on how much land they own, whereas Gove is now proposing a system based on the public good the farms deliver. It remains to be seen what exactly constitutes a public good.
This means that further pressures will be placed upon agribusinesses to ensure that costs are kept at a minimum, and resilience is increased. Agribusinesses and farmers will need to adhere to whatever new government regulations are brought in on public goods to make sure that they are able to benefit from subsidies.
The third major area of impact is trade. Here are two important stats:
- Food and drink is the UK’s largest manufacturing sector and contributes over £28bn to the economy every year.
- 70% of all UK food exports go to the EU.
In the EU, we have access to tariff-free trade, so our exported food is much more competitively priced compared to a similar standard of food from outside the EU. If we lose access to the single market our food could potentially become less attractive within the EU because it then comes under World Trade Organisation tariffs, increasing the price. As an example of an industry that could face significant challenges, of the UK lamb that is exported, 90% goes to the EU.
Within the issue of trade, comes the problem of world food quality standards. Last year’s chlorinated chicken story highlighted the issue with focusing our exports outside the EU. The US and several other countries around the world have lower standards of food quality and hygiene than we currently have in the UK. This makes our food potentially more expensive in comparison and harder to market while also opening the UK up to lower standards of food imports than we currently have in the EU.
As you can see, the potential impact of Brexit on UK farming and agribusiness is enormous. The complication and difficulty surrounding the Brexit talks with the EU and the trade talks with the rest of the world means that unfortunately, nothing is set in stone. This makes it trickier to prepare for the outcome. What is important is that you streamline and make your business as efficient as it can possibly be.
Primetics are always working with customers to come up with effective solutions for their developing needs, including any Brexit challenges you might be facing. If you would like to discuss anything, please get in touch with us on 01257 279 811, or email email@example.com.