Brexit & Farmers

While the mainstream press has devoted numerous column inches to discussing how Brexit will impact financial services, the NHS and the housing market, there seems to have been much less space given over to looking at the impact of Brexit on agriculture.

Agriculture and the EU – the Common Agricultural Policy

CAP has been the subject of many satirical jokes and, to be fair, it has arguably deserved at least a few of them. In its earliest form, CAP saw farmers receive subsidies in line with the amount of food they produced, which then led to butter mountains, wine lakes and the old joke that its main purpose was to subsidise French farmers. To address this, CAP switched to providing subsidies based on the amount of land a farmer had. This approach basically solved one problem by creating another in that it almost made it possible for people to buy farm land and “set it aside” to collect the subsidy without doing any actual farming.

Taking off the CAP

While the UK is still a member of the EU, which will presumably be for the next two years or thereabouts, the CAP will continue as usual and the UK government has guaranteed that equivalent subsidies will stay in place until 2020, although it should be noted that this basically translates as “for the year after Brexit”. After that, everything is open to negotiation, particularly since the UK should have a general election in 2022. While removing subsidies is unlikely to go down well with their recipients, there has long been a counter-argument that subsidies in general encourage inefficiency and that CAP is particularly bad for this since it subsidises farmers for setting aside land rather than using it productively. In fact, some people take the view that removing CAP will actually stimulate agriculture since it will put a stop to people using land just for subsidies.

Free trade versus tariffs

Of course, CAP is only part of the story of EU membership. The other part is the fact that EU membership allows the UK to trade freely with the EU. It also means that the UK is included in international trade agreements between the EU and other countries. The question then becomes how much the UK benefits from either of these. The UK is in a slightly unusual position in that it is both a significant importer and exporter of food and in both capacities, it trades with the EU as well as with countries outside the EU. In this context “food” means both food and non-alcoholic drinks, i.e. the alcohol market is a separate issue. A quick glance around supermarket aisles shows that food imports include more than just specialty goods such as French cheeses. Many staple foods such as fruit, vegetables and meat are also imported. Likewise, UK food exports are a mixture of specialty foods and staples, with wheat doing particularly well recently, presumably as a result of sanctions on Russia. Post Brexit therefore, the UK could leverage its food imports to secure a decent deal for its food exports. Alternatively, it could focus on turning exports inwards and aim to produce staple foods locally and keep exports focused on specialty goods.

The issue of “buying British”

Anyone who’s paid attention when they’ve been out shopping has probably noticed that British-grown fresh produce tends to be clearly marked as such these days, indeed Morrisons supermarket has undertaken extensive promotional work regarding its commitment to buying British where possible. Even though these products may carry a price premium there are a number of reasons why shoppers may prefer them, such as the fact that they are better for the environment (as they are transported over shorter distances) and the fact that the UK generally operates to high animal-welfare standards. With all of this in mind, Brexit could provide an opportunity to those who are serious about farming to refocus their efforts on the UK first and only look to exports as a secondary market (except possibly for specialty goods).