Brexit could knock €36,000 off UK farm incomes

Brexit would have a significant negative impact on UK farm incomes, a new report commissioned by the National Farmers’ Union (NFU) has found.

The report was conducted by Wageningen University, a Dutch university and it looked at the impact of a number of possible trade and farm support scenarios that would be open to the UK Government in the event of the country voting to leave the EU.

Three trade scenarios were modelled;

  • A Free Trade Agreement (FTA) between the UK and the EU.
  • The World Trade Organisation (WTO) default position.
  • UK Trade Liberalisation.

Under the first two scenarios, the FTA agreement and the WTO default position, the report found that UK agricultural policy would become more protectionist than it has been under the present CAP.

Furthermore, it found that farmgate prices would increase because imports would be more expensive and under the WTO scenario tariffs would become more expensive.

However, a more protectionist policy would be a reverse of the policies that successive UK governments have pursued for the last 40 years, according to the report.

It found that it would also go against a worldwide trend to more open agricultural trade and would be in contradiction to the stated aims of many of those who advocate that the UK should leave the EU

Meanwhile, the third scenario of UK Trade Liberalisation, would appear to be more in line with the established UK government policy and with the views of many of those who favour Brexit.

This scenario has a significant negative impact on farmgate prices for a number of products, but mainly for meat and some dairy products, it found.

Under this scenario, the report expects less meat and milk would be produced, therefore decreasing the UK’s self-sufficiency levels in those products, and creating a knock-on effect on demand for feed.

However, lower tariffs would offset the higher trade facilitation costs faced by importers and could therefore be appealing to the government.

Should the UK vote to leave the EU, the UK government would need to look at direct income support to provide to their farmers.

The report outlined three different approaches to farming support payments:

  • Retention of 100% of the current level of direct payments to UK farmers;
  • Reduction by 50%;
  • Abolition of direct payments.

Under the FTA agreement scenario, with the full abolition of direct support, farm incomes would fall on average by €24,000.

Under the WTO sdefault position scenario, with the full abolition of direct support, farm incomes would fall on average by €17,000.

Under the UK Trade Liberisation scenario with the full abolition of direct support, farm incomes would fall on average by €36,000.

Accoridng to the NFU report, the results of each scenario show that the biggest driver of UK farm income change is the level of public support payments available.

The positive price impacts on farm incomes seen through both the FTA and WTO default scenarios would be offset by reductions in direct support.

A reduction of direct support, or a complete elimination of it, would exacerbate the negative impact effects seen under the UK Trade Liberalisation scenario, it found.

As a consequence, the research shows that the combination of a more liberal trade policy and a reduction or elimination of direct support would make many British farms less viable.

While this report points to several outcomes should Britain exit the EU, there are many elements that cannot be factored in the study.

The impact of Brexit on the availability of foreign labour, the price of UK land or on the euro/Sterling exchange rate are some of the elements that could not be considered in the report.