Business & Finance

A Difficult Field to Plow: Brexit’s Impact on Farmers and Farming in Britain

It is estimated that 54% of British farmers voted Leave in last June's EU referendum, despite receiving billions of pounds in EU subsidies. What will happen to British agriculture once the well runs dry?

An estimated 54% of British farmers who voted in the UK’s 2016 EU referendum backed leave. This was despite the National Farmers Union (NFU) warning that several Brexit scenarios would lead to almost certain catastrophic losses for British agriculture. Some predictions even went as far as to suggest up to 90% of farmers could go out of business following a possible Brexit. So a year on, what cherries can the UK salvage for its crop and how might Brexit affect the very physical landscape of Britain?

In 2015, UK farmers received around £2.4billion in direct EU payments alone. Farmers can then gain even more support through the rural development funds designed to encourage better environmental management. Indeed, some estimates suggest that around two thirds of all UK farm incomes come from subsidies, and the impact of the loss of these is likely to be high.

But more concerning still for British farmers in the countdown to Brexit are the revelations made in a pre-referendum report by the NFU itself. In their report, the NFU finds that UK farmers will lose out in all post-Brexit cases unless 100% of the direct payment support received under the Common Agricultural Policy (CAP) is maintained. Two key factors drive this result: the UK presently imposes a high tariff towards non-EU countries for agricultural products (16%); and the system of subsidies that has evolved such that around 2/3 of farmer incomes now come from direct payments under the CAP, due to the pressure to keep prices on the shelves down.

The problem with maintaining protectionist policies towards agriculture is that they effectively prop up inefficiency. Exceptions for agriculture regarding protectionist external tariffs are increasingly less tolerated by the World Trade Organisation (WTO) and it is likely the UK will face mounting pressure to lower them once out from under the EU’s aegis. Without such protection, UK products simply aren’t competitive against cheaper goods available from elsewhere. Even cutting corners and minimising regulations that ensure better environmental practices may only provide limited (and short term) gain in the UK, where wages are higher and thus farm outlays greater.

It therefore comes down to a choice about values. Does the UK so astutely believe in the hyperbole on free trade peddled by the pro-Brexit government that it will damage its own agricultural sector, perhaps fatally, in the name of liberalized markets; or does it prioritise cultivation on its own territory? What does the UK want?

It is unlikely the UK will be inclined to continue support at current levels. The UK government’s line is that funding arrangements will be maintained until 2020, and beyond that, farmers face uncertainty. The UK has consistently called for a lowering of the EU budget on the CAP and has been a strong advocate of free trade. Indeed, before entering the European Economic Community in 1973, the UK was a major importer of New Zealand lamb. With global goods transport now cheaper and quicker than ever, it seems improbable that many UK farmers will be able to compete without preferential tariffs on selected goods, a practice increasingly forbidden by the WTO.

EU products will be more expensive (due to their high production costs), so they are unlikely to compete in a post-Brexit UK market. Instead, with domestic products being uncompetitive due to higher land and production outlays, the UK will import from further afield; engendering all the associated environmental and carbon costs. A liberalised UK economy on its doorstep may finally press the EU to liberalise its own agricultural tariffs, but this will likely be of modest benefit to the UK when other costs, such as reduced subsidies, are taken into account. Should UK farmers wish to maintain their current 80% level of external trade with the EU, they would need to continue to comply with all EU rules in the areas concerned.

But while for farmers the field ahead looks rocky; depending on your perspective, there could be some light on the horizon. The ecologist, writer and activist George Monbiot advocates a more positive approach to the opportunities presented by Brexit for UK environmental management. Instead of supporting the widely damaging, ecologically costly and inefficient practice of hill livestock farming, he suggests the government could embrace the opportunity to invest in new land management regimes, such as rewilding. With farming set to enter a decline, much more land would be made available for conservation, recreation and, needless to say accommodation.

Ecosystem service valuation measures the costs of providing ‘services’ such as water filtration, if the natural system wasn’t there to provide it. In 2014 a team of scientists claimed that ecosystem services alone are worth around $125 trillion to the global economy. This figure is bigger than the entire world’s GDP. The UK is no exception, but the 2011 National Ecosystem Assessment has found worrying evidence of declines in around 30% of ecosystem services, and many more are in a state of degradation. Restoring these environments through the informed abolition of arcane protectionist policies could thus provide more economic benefits than simply buoying old markets through new funding strategies alone. Perhaps Brexit will provide opportunities after all — but it may not be quite how we expect it.

How the UK’s farming industry proceeds now will come down to a choice about values, but also about information. What was lacking in the referendum decision could now be restored to embrace opportunities unimaginable before June 2016. This will rely on informed policy-makers and crucially, an informed electorate. However, a conservative approach to the future of Britain’s farms, trying desperately to prop up an old system could simply produce a more rusty version of the one the UK has just left.

What is clear is that whatever the result, it will be interesting. Although UK farming will plough on for some time yet, the near-future climate for farmers in Britain is perhaps as turbulent as the British weather.