‘A hard Brexit could result in farmers losing around €3,000/year’

The worst case scenario of a ‘hard’ Brexit could result in steep reduction in farm output of around €3,000 per farm annually, according to Ibec – the group that represents Irish business.

This is according to Ibec’s interpretation of a recent report by InterTradeIreland and the ESRI (Economic and Social Research Institute), which quantified the expected impact on the food and drink sector of a hard Brexit.

The worst case scenario included the introduction of World Trade Organisation (WTO) tariffs and non-tariff barriers, as well as a 10% exchange rate depreciation from 2016 levels.

If this scenario was to come to pass, the report showed that exports of food and beverage manufacturing to the UK could fall by 45%, or €2.1 billion, Ibec added.

Total food and beverage manufacturing turnover is €27 billion, of which €4.6 billion comes from UK exports. As such, the report outlined that this ’hard’ Brexit scenario would reduce overall food and beverage manufacturing output in Ireland by around 8% permanently.

Brexit

Ibec’s own modelling extending from these findings, suggests that a €2.1 billion fall in Irish food and beverage manufacturing exports would translate to a fall of over €415 million in demand for farm output.

“Applying this to figures from Teagasc’s National Farm Survey suggests that the immediate impact on Irish exports to the UK alone would translate to a steep reduction in farm output of around €3,000 per farm annually – across 140,000 farms.

“Assuming a proportional fall in variable costs this would result in a net 6.5% fall in average farm incomes overall and up to a 9.5% fall in incomes for livestock farms.

“Further potential impacts of Brexit on product displacement, funding on the Common Agricultural Policy (CAP) or domestic consumer demand are not taken into account,” Ibec added.

Future challenges

These conclusions emerged as part of Ibec’s latest Quarterly Economic Outlook; it forecasts strong growth in economy and increases to the labour market.

Despite this positivity, Ibec’s Head of Tax and Fiscal Policy, Gerard Brady, said there are serious downside risks on the horizon.

“Following a fall last year, indigenous exports to the UK have recovered some lost ground in the first half of 2017. But there will be increased volatility as the year goes on, with Sterling depreciating once more since the UK election.

No matter what the outcome, Brexit will hurt both our indigenous exporters and rural regions disproportionately. Budget 2018 must include measures to protect these vulnerable sectors.

“Our analysis shows that around 243,000 workers – or 13.2% of the employed population – work in the most Brexit-exposed sectors, such as agri-food and beverages, tourism, transport and traditional manufacturing,” Brady said.

He outlined that the counties with the highest exposure to a hard Brexit are Cavan (28%), Monaghan (27%), Kerry (22%) and Longford (21%) – with over one in five workers in each of these counties employed in exposed sectors.

Meanwhile exposure is lowest, as expected, in urban areas, Brady added.

He concluded by saying: “The good news is we are facing these challenges from a position of strength, due to the strong substance behind our business model.

“Budget 2018 must ensure decisive policy action to improve competitiveness and adopt measures to prepare our indigenous enterprise base.”

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