If you need reminding about the complexity and conflicting perspectives over Brexit look no further than the UK’s agri-food sector. A new report from the House of Lords EU Energy and Environment Sub-Committee, published May 3rd, spells out the ‘critical challenges’ for the sector from leaving the Common Agricultural Policy (CAP) and the Single Market and Customs Union, especially for agriculture.
To put this in perspective the report reminds us that EU subsidies make-up between 50%-60% of farm income in the UK as a whole. For Northern Ireland, this rises to 87% of total farming income, 80% in Wales, and around 75% for Scotland. The UK also relies on the EU for 80% of its food and agricultural exports.
On an optimistic note the Lords says Brexit offers the long-term opportunity to review and improve its agricultural, environment and food policy to better meet the needs of the agri-food sector, the environment and consumers. However, one expert giving evidence described the long-term as anything from 5 to 15 years.
Short-term, the possibility of a chaotic and uncertain food and agricultural future looms with the report saying there are “critical challenges”. These are summarised as: forging new trading relationships with the EU and the rest of the world; providing regulatory stability and clarity; addressing the future of funding for the agricultural sector; and, but by no means least, ensuring access to labour.
Tariffs could disrupt integrated supply chains
The Lords heard evidence on how future tariff and non-tariff barriers to trade could disrupt integrated supply chains between the UK and EU. But the Lords heard mixed evidence about the consequences. On the one hand, high tariffs on imports would raise the cost of food to UK consumers, but on the other hand, lower tariffs could reduce the cost of food to consumers – although this might see domestic agriculture’s competitiveness undermined.
The UK being a big net food importer – £38.5 billion of imports in 2015, compared to £18 billion exports – is an attractive market which some argue makes the country a welcoming prospect in an open-market global economy. But this might come at the cost of making many UK food and agricultural businesses uncompetitive as well as lowering welfare standards, legislation and environmental standards and damaging ‘brand Britain’.
Mixed messages from Government over future of agri-food sector
The report notes that sorting out future trading relationships will require balancing complex interests. Currently, the report states, the Government is giving mixed messages to the agricultural sector over its wish for the UK to become a global leader in free trade while at the same time maintaining high quality standards for agri-food products within the UK.
The Lords also heard evidence that it would not necessarily be easy to arrange new trading arrangements with non-EU countries. For example, there are 36 preferential trade agreements covering 60 third countries which the EU has already negotiated on the behalf of Member States, but these would not automatically transfer to the UK outside the EU.
The report states the majority of witnesses were clear about the need to preserve tariff and non-tariff free trade with the EU and this should be a Government priority. The report notes that there was broad consensus among witnesses that negotiations could not be concluded within two years and that a transitional period would need to be negotiated between industry and different stakeholders. Farmers will need time and clarity from Government to adjust to a new regulatory and funding system after Brexit, the report says.
Workforce and resources crucial issues
The Lords heard evidence on how dependent the UK agri-food sector is on EU migrant labour for it to operate successfully. While the exact numbers are not available for the industry as a whole, EU migrants make up a substantial proportion of the workforce across food and agricultural sectors for both seasonal and permanent staff. For example, for seasonal workers, the Lords heard, 90% of the total labour requirement for the UK’s horticultural sector are EU migrants – some 75,000-80,000 workers.
The Lords report also pays attention to the resources needed to manage and implement Brexit. It notes that the Government department responsible Defra (Department for Environment, Food and Rural Affairs) has had its budget cut by 29.9% in real terms between 2010/11 to 2015/16. Guy Smith, Vice President of the NFU, told the Lords, Defra had been: “…first in the line suffering government cuts…[and] they do not have the necessary resources and skillsets in place to take us forward to make sure that our industry has a smooth transition” (page 44).