A new independent analysis published this week shows that leaving the single market and customs union poses a serious risk to Scottish farming.
Using real farm data from the 500 farms which contribute to the annual Farm Business Survey, a group from Scotland’s Rural College (SRUC) has analysed the potential economic impact of three potential post-Brexit trade scenarios on beef, sheep, dairy and cropping units.
The report found that in every scenario Scotland’s farmers would be worse off compared to under the current trade arrangement, with some or all producers facing lower returns.
Working under the constraints of not knowing the eventual outcome of Brexit talks, the analysts have compared three scenarios (see panel) with and without Pillar One support at current levels.
The impact of staying close to the EU single market and having a customs union makes little impact although allowance has been made for a 5 per cent price deduction to cover extra transaction costs.
Operating under World Trade Organisation (WTO) rules -a real option if Brexit talks fail- has a varying outcome.
Because there would be tariffs on EU imports there would be opportunities for import substitution and this could raise dairy and beef prices by 31 per cent and 23 per cent respectively by 2022.
Sheep famers would however take the pain.
“Even with a direct support staying at current levels the WTO option would lead to the ewe flock more than halving,” said the report.
The Unilateral Trade liberalisation option, sometimes called the ‘Singapore option’, which would see very low or zero tariffs imposed on food imports from around the world and would have a ‘very significant negative impact on Scottish farm profitability’.
Virtually no sector would remain in the black even with support.
Cropping farms would be less affected by the trading option chosen but would be vulnerable to reductions in Pillar One support.
Steven Thomson, Senior Agricultural Economist at Scotland’s Rural College, said: “The findings reiterate how vulnerable hill farming systems are to trade deals and policy choices, stressing the need to take the disadvantaged areas into account during the Brexit process.”
Rural Economy Secretary Fergus Ewing added: “This study confirms once again what the Scottish Government has been saying all along – that the interests of farmers are best served by remaining within the EU.”
The three options considered:
Free Trade Agreement with the EU where:
The UK and EU retain tariffs and quota free access to each other’s market. The UK maintains EU tariffs to the rest of the world. There are 5 per cent trade facilitation costs.
World Trade Organisation tariff regimes where:
Existing EU tariffs are adopted by the UK. These apply to imports from, and exports to, the EU and the rest of the world. There are 8 per cent trade facilitation costs.
Unilateral Trade Liberalisation where:
There are zero tariffs on UK imports. UK exports are faced with tariffs set by the WTO. There are 8 per cent trade facilitation costs.