Following the Conservative Party retaining control of parliament in the UK with its biggest majority in a generation, farm operators are keen to ensure that the risk of a no-deal Brexit is eliminated, looking for reassurance as they plan for the future.
For three years since Britain voted to leave the EU many have walked a tightrope as they contemplate what life looks like outside of the EU and its walled garden. Will we continue to build upon Britain’s high farming standards or will new pressures see us signing up to free trade agreements on terms favourable to countries such as the US?
Brexit and farming’s worst-case scenario
Many fear that this could see British farmers being forced to lower standards to compete and in the worst case scenario might see them going out of business. A recent BBC headline suggested a no-deal Brexit could cost the farming industry £850m a year in lost profits, something that would see it eclipsing mad cow disease (BSE) and the foot and mouth crises of recent years.
With food and farming in the UK providing around 475,000 jobs, and just over 60% of the country’s food grown locally, a recent parliamentary committee report confirmed as much, suggesting that farmers were at risk from an influx of lower cost imports post Brexit.
This is one reason that the National Farmers’ Union (NFU) has been pushing for existing high production standards to be preserved in any future agreement.
Looking beyond the EU common agricultural policy
Add the loss of around roughly £3 bn a year that farmers currently receive from taxpayers via the EU’s common agricultural policy and it’s obvious why there is concern over new tariffs that might do irreparable damage to the export market as lower cost imports flood in.
The theory is that by forcing farmers to compete against overseas food exporters, some of whom may be operating to different standards, UK farming could become unprofitable and face a ‘race to the bottom’. While the government has made a pledge to match these payments until 2022, it is unclear what will happen beyond that .
Why Scotland’s farmers fear a no-deal Brexit
Scotland’s fears of the UK crashing out of the EU without a deal have been widely reported too. As things stand, the EU accounts for nearly 40% of Scotland’s imports and around 18% of its exports, so there are real fears for its food and agriculture sector.
The problem with a no-deal scenario is that the UK would lose the safety net of the European Single Market which currently ensures free trade across EU member states. In the event of that happening, World Trade Organization (WTO) rules would come into effect – this would mean that new agreements would need to be formed between the UK and its international trading partners.
Dairy and WTO rules
With the UK dairy industry employing some 80,000 people and producing approximately 14bn litres of milk each year (according to the NFU), there are very real concerns for the industry in the event of a no-deal Brexit.
As it stands, most UK dairy exports go to EU trading partners, with various parties putting that figure somewhere near 90%, and that’s where things get problematic. No-deal would mean the UK abiding by WTO rulings and, more specifically, its most-favoured-nation (MFN) tariffs. Under that scenario, EU dairy becomes expensive to import, with tariffs also severely hampering sales of UK dairy products in the EU market. A further complication arises with a hard border in Ireland, which would almost definitely mean that tariffs would render current raw milk processing agreements unprofitable.
This, of course, has had implications already. Half of all manufactured cheese in Ireland goes to the UK and the threat of a ‘Cheddar mountain’ in the event of a no-deal Brexit has seen several manufacturers switch to other types of cheese to lessen dependency on the UK. As it stands, the Cheddar market is worth most of the €367m in dairy exports a year, with Ireland accounting for around 88% of UK Cheddar imports, according to The Irish Times.
New and post-Brexit opportunities for UK dairy
Yet, global demand for dairy is growing and it may be that countries such as China, the world’s biggest dairy importer, provide new post-Brexit opportunities for UK dairy. British dairy producers will also note those geographical regions in the Middle East and Africa where consumption continues to outpace production.
Yet, in truth, the future for UK farming remains unclear and huge questions remain across the whole of the agricultural industry at this point. One decisive election result certainly does not mean an ‘oven-ready’ Brexit as described, particularly as the UK’s new Prime Minister can now decide how it is cooked.