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Evidence shows no-deal Brexit will not lead to ‘Farmageddon’

Economic analysis shows a no-deal Brexit will not lead to ‘Farmageddon’, but there is no room for complacency, says trade policy specialist and consultant economist Derrick Wilkinson.

Despite the last-minute Withdrawal Agreement announced on Thursday, it faces substantial opposition from many MPs, and may not be approved by Parliament.

 

The UK could then leave with no deal at the end of the month.

 

If we put to one side the more lurid headlines and histrionic language, what does the available research suggest the consequences for farming may be?

 

Estimates of the changes to farmgate prices for a range of goods, if there is a no-deal Brexit and the UK imposes the tariffs it has announced, were published by the AHDB earlier this year.

 

If we apply those price changes to the Government’s accounts for Total Income from Farming (TIFF), we see the value of crop output rises by 2.7 per cent, the value of livestock output falls by 3.2 per cent, and overall agricultural output falls by 0.6 per cent – about £100 million.

 

Increased input costs mean TIFF falls by an estimated £400 million. This is well within the normal changes each year.

 

Hysterical

 

While this doesn’t support the more hysterical suggestions of a ‘Farmageddon’, or that half the industry will go bust, there’s no room for complacency either.

 

More detailed analysis suggests there will be significant problems for most livestock producers, and many crops producers will also struggle to cope with the changes Brexit will entail.

 

Thousands of farms are at risk of going out of business.

 

As if this wasn’t enough, the Government proposes phasing out farm payments and replacing them with new payments for as yet unspecified public goods and services.

 

Because such a major change would cause significant disruption for farming, Government plans to ring-fence a share of the payment reductions for structural adjustment measures.

 

Critical

 

Unfortunately, although these measures could also provide critical support for the industry if there is a no-deal Brexit, they won’t start for another two years.

 

In a couple of weeks, we could leave the EU in the most disruptive way possible, yet no similar measures have been announced to support the industry and help it adapt.

 

Nor, it seems, have industry leaders had much to say about the practical support and adjustment measures that will be needed.

 

They could, for example, call for:

  • A Government commitment to introduce the Special Agricultural Safeguards provided for in the WTO Agriculture Agreement. These allow additional temporary tariffs if import prices fall, or import volumes rise, past set limits.
  • Price and income stabilisation insurance assistance
  • Financial assistance for farm business investment
  • Measures to enable producers to retire, especially tenants with fewer assets, and to help more new entrants get their foot in the door
  • Greatly increased funding for research and development

We may be lucky and leave with an agreement.

 

But if a no-deal Brexit really would be the catastrophe some fear, why haven’t industry leaders called urgently for the practical measures farmers will need to survive the impending ‘cataclysm’?

 

Relying on luck is not much of a strategy.

 

Derrick can be found tweeting at @DGWilkinson


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