The impact on farm incomes of a vote to leave the EU in June depends on the nature of trading arrangements the UK puts in place and the level of support it provides, according to a new report by the NFU.
A move towards a more liberal trading policy by the UK following Brexit would result in a significant reduction in farmgate incomes across the livestock sectors, particularly if support is cut, according to a report commissioned by the NFU.
But a more protectionist approach would see a boost in farmgate prices as imports became a less attractive proposition, the report by a Dutch research institute concluded.
However, the biggest factor when it comes to farm incomes would be the approach the UK Government took to farm support.
The NFU commissioned researchers at Wageningen University to consider the impact on UK agriculture of nine possible trade and farm support scenarios open to the UK Government in the event of Brexit.
The results varied significantly, depending on the scenario, ensuring the report will give ammunition to both sides of the debates when it comes to winning the farming vote.
The study looked at three possible trade scenarios:
Under the trade liberalisation scenario - considered by the NFU to be the most realistic in the event of Brexit - UK farmgate prices and incomes, particularly on beef farms, would fall significantly, as competition from imports increases on the back of lower UK import tariffs.
As a result UK farm production would decline, further eroding UK self-sufficiency.
Under the other ’more protectionist’ scenarios, farmgate prices and incomes would increase, subject in some cases to support levels being maintained, as UK tariffs would keep a lid on imports but access to the EU market remained.
NFU director general, Martin Haworth acknowledged the modelling work was ’limited’ when it comes quantifying the impact of Brexit.
For example, it did not take into account the impact if the UK government decided to cut the level of regulation facing farmers.
He said: “Some of the scenarios appear to suggest that there could be serious risks to farm income from leaving the EU, while the results of others suggest there could be a more favourable outcome.
"It comes down to a matter of judgement as to which of the scenarios appears the most likely. This in turn will depend on the policy position adopted by the UK Government.
"In the past our government has been a strong advocate of open and free trade. It has called for tariff protection across all farm sectors to be reduced and it has called for the abolition of direct support payments made through the CAP.
“The real questions to be asked and considered ahead of the referendum are political rather than economic.
"What would the UK Government’s position be on international trade and its impact on the consumer price of food? How would it ensure British farmers are treated fairly?"
The NFU is currently discussing the report with members in a series of 28 meetings across its regions, ahead of a meeting by the NFU council on April 18 to decide the union’s position on the Referendum.
Of the three scenarios, the UK Trade Liberalisation is the most in line with established British government policy and the views of many of those who favour Brexit, according to the NFU.
Under this scenario, the EU would apply its external Common Customs Tariff (CCT) to UK exports while the UK applied a 50 per cent reduction in those rates to both EU and non-EU country imports.
The impacts would include:
According to the NFU, this is the scenario most commonly proposed by those who advocate Brexit, who argue, with a positive trade balance with the UK, it would be in the EU’s interest to quickly agree an FTA with the UK.
Under this scenario agricultural trade between the EU and the UK is fully liberalised and duty free apart from UK lamb exports to the EU.
The report assumes the EU would want to protect its members from lamb imports, which would be deemed ‘a sensitive product’ and be subject to a quota of 55,000 tonnes.
The UK would retain current EU tariff levels for non-EU imports.
The impacts would include:
If the UK leaves the EU without having negotiated free trade agreements with the EU and its international partners, it will fall back onto the WTO default position.
Under this scenario the EU would apply its external Common Customs Tariff (CCT) to UK exports, while the UK applied it to EU and non-EU country imports.
The UK would be unable, for example, to import certain products like sheep meat from New Zealand at zero duty through the EU’s trade arrangements.
The impacts would include:
AHDB chairman Sir Peter Kendall, former NFU president and prominent figure in the Farmers For In campaign said that the report highlighted why Britain’s farmers are better off inside the EU.
He said: “The report’s conclusion highlights the most likely outcome for British agriculture if we leave the EU and it makes for depressing reading, with many farms facing a severe loss of income.
"This is exactly why Britain and our farmers will be better off if we remain in Europe – with full access to the single market giving us the best free trade deal of all.
"Leaving risks higher prices for families to put food on the table, lower incomes for hardworking farmers, and years of uncertainty creating a damaging economic shock.”
Shadow Farming Minister Nick Smith said: “The NFU’s report proves that if we vote to leave the EU the options on the table leave UK farming worse off.
“The agricultural industry supports millions of jobs in the UK and part of that success is access to 500 million consumers and customers.
“Being part of Europe makes our economy stronger, gives us better security and allows us to have a real say on the global stage.
“Our farmers deserve every opportunity to thrive and I believe they have the strongest and safest chance to do so by staying in.”