If farmers and food businesses in Northern Ireland accept Brexit is going to happen, then they must look at how they can capitalise accordingly in the years ahead, Danske Bank’s Head of Agribusiness Robert McCullough believes.
“We are operating in one of the most lucrative markets in the world and this presents us with huge opportunities.
“The domestic UK market is only 76% self-sufficient and globally populations and incomes are rising, so we need to find ways to maximise how we sell into those markets.
“Northern Ireland producers meet high expectations for provenance, traceability and welfare, and with the ability to shape our own farming policies and a competitive advantage created by the weakness of Sterling, there are opportunities for the sector to further increase the contribution it makes to the local economy.”
However, McCullough also said the bank is well aware of the numerous challenges facing the sector and continues to advise farmers to be realistic.
“We know there are challenges and not just from Brexit.”
The exchange rate benefits may be short lived and there is a lack of clarity on political support for the agriculture sector, which has traditionally been weak at Westminster, so it is important we have a local Minister in place sooner rather than later.
“In terms of the financial support that will replace payments that many farms currently rely on from Europe, there is also a high chance they will be asked to do more with less.”
He said that the bank is continuing to urge farmers to deleverage while times are good rather than taking on more debt, to review the viability of their business to see how they might cope with less support, and to be disciplined when it comes to cashflow.
“Local farmers and producers are extremely resilient and Danske Bank is committed to supporting sustainable businesses as they strive to succeed in 2017.”
Danske Bank Economist Conor Lambe agrees that the global picture is mixed for the agri-food industry.
“Economic growth is expected to slow in both the UK and Northern Ireland in 2017. Inflation is increasing and is expected to rise further this year, squeezing households’ purchasing power and leading to lower consumer spending growth.”
Uncertainty relating to Brexit is also likely to act as a drag on business investment. Real GDP should rise again this year, but the rate of growth will likely be lower than last year.
“We expect the local agriculture, forestry and fishing sector to grow, but at a low rate, both this year and in 2018.
“We are projecting real GVA growth of 0.3% in 2017 and 0.2% in 2018. We also expect employment in the sector to grow by around 0.3% in 2017 but to slow to 0.1% next year.
“The weaker Sterling should provide a short-term boost to agri-food businesses that sell overseas. This is particularly pertinent for dairy firms within the food and drink processing sector, where exports make up around 45% of total sales.
“However, looking towards the longer-term, there is considerable uncertainty on the horizon for local farmers.
“Questions remain around what access Northern Irish businesses will have to the EU market, including the Republic of Ireland, once the UK leaves the European Union. While funding to farmers has been guaranteed until 2020, it is not yet clear what will happen in the years to follow.”