The UK’s Brexit deal could be a make or break scenario for Britain’s farmers, according to a study published by the Agri-Food and Biosciences Institute (AFBI) on Wednesday (16 August).
Changes to the UK’s trading relationship with the EU and other global partners once it leaves the single market and customs union could have a major impact on trade flows.
The independent study analysed the impact of three different post-Brexit trade scenarios on agricultural commodity prices in the UK, the volumes farmers produce and the prices they command.
While some post-Brexit changes may lead to lower costs for consumers, they could also slash farm incomes and increase Britain’s reliance on food imports, according to AFBI.
The three post-Brexit scenarios analysed by the think tank were: a favourable bespoke free trade agreement with the EU, a switch to World Trade Organisation (WTO) rules with Most Favoured Nation (MFN) tariffs and unilateral trade liberalisation.
Britain’s Brexit negotiating team, led by David Davis, is aiming to strike a free trade agreement (FTA) with Brussels as soon as possible after leaving the EU. This would allow the UK to negotiate its own trade agreements with other countries while retaining many of the benefits of free trade with the bloc’s 27 countries, such as tariff and quota free access to the single market.
Under a bespoke FTA scenario, the prices received by farmers for their goods (producer price) would remain largely unchanged, varying from -1% to +3% depending on the commodity. According to the study, this would not be enough to cause significant changes to the total quantity or value of British farm produce. Nor would it have a major impact on consumer prices.
However, it may not be possible to negotiate such an in-depth deal in the time available, and farmers are demanding certainty. Meurig Raymond, the president of the farmers union NFU, said: “It’s essential that the government prepare transitional arrangements to avoid a cliff-edge scenario. Farming businesses will need time to adjust to new trading environments.”
“It is vital that the government is very clear on what success looks like for British food and farming. Achieving the right trade deal will be pivotal to many farming businesses and the country’s ability to produce food,” he added
WTO rules a mixed bag
If EU and British negotiators fail to reach a post-Brexit trade agreement before the talks end on 29 March 2019, all UK-EU trade will revert to WTO rules.
Britain currently imports about 40% of its food and its biggest market for both imports and exports of food products is the EU. Even with MFN status, trade tariffs would be high, and AFBI believes this would lead to significant changes in the flow of trade.
Under this scenario, the UK could expect to see significant producer price increases for some commodities, especially milk and dairy (+30%), pigs (+18%) and beef (+17%), with corresponding gains in production volume and output value, according to the think tank. This would boost the UK’s self-sufficiency in these sectors as EU imports became more expensive, but would also drastically increase consumer prices.
However, tariffs would undermine the competitiveness of Britain’s big export commodities. Farmers producing sheep (producer price -30%), wheat (-4%) and barley (-5%) would suffer income losses and the total volume of production would fall.
In its final scenario, AFBI modelled what would happen if the British government abolished all tariffs on food imports, while the UK’s trading partners kept MFN tariffs on UK exports.
Such a move would slash prices for UK consumers by opening the market to cheap imports from around the world, but British farmers would suffer as a result.
Producer prices for beef would fall by 45% and sheep by 29%. While these are the most extreme cases, the price, production volume and output value of all British agricultural commodities would fall significantly, the study said.
Raymond warned against such an outcome, arguing that the British government should ensure that “UK farmers are not put at a competitive disadvantage to overseas producers subject to different standards”.
The think tank stressed that producers elsewhere in the world are very competitive and that these results “strongly indicate that there is a more pressing need to improve domestic productivity and competitiveness under this trade scenario”.