Phil Bicknell, Market Intelligence Director of the Agriculture and Horticulture Development Board (AHDB), today claimed that Brexit threatens to reduce UK farm incomes by as much as 50 percent. Speaking on BBC Radio 4’s Today programme, Bicknell said that the AHDB’s latest report, ‘Brexit scenarios: an impact assessment‘ provides analysis of a range of post-Brexit scenarios and their potential economic impacts on UK farming.
Echoing concerns already expressed by many farmers throughout the UK, Bicknell confirmed that those that rely on EU Common Agricultural Programme (CAP) funding — like the average sheep or beef farmer — will be the most negatively effected after Brexit if farming subsidies are reduced or abolished altogether. This echoes similar concerns expressed by the National Farmers Union back in April 2016 when they explained that most UK farms could not survive without EU funding.
According to the AHDB report, the average annual income of UK farmers is £38,000. In light of the disappearance of CAP funding and in a future that does not include a free trade agreement with the EU, that average income could fall as low as £19,000.
In other words, farmers, on average, rely on taxpayers topping up half their incomes. And agricultural subsidies operate much the same as social welfare income top-ups. Farming isn’t economical for most and the state steps in to reduce the risks and increase incomes. On top of this, many agricultural workers are low paid and would be supported by tax credits and other wage subsidies. There is nothing wrong with this picture necessarily, although farmers are not often considered to be part of the welfare state.
Though the government has said it will support farmers who rely on CAP through the year 2020, what happens after that is uncertain. The CAP has come under a lot of criticism from Left and Right over the years.
Critics point out that the existing system of EU subsidies unjustly privileges the rich. A Greenpeace study released in September 2016 found that CAP payments totalling 10 million went to some of the richest Brits, including the Queen and the Duke of Northumberland.
One of those, Lord Gardiner, who is a partner in a farm that received £49,000 in 2015, will be involved in the development of a new system of farm support as the House of Lords spokesperson for the Department for the Environment, Food and Rural Affairs (Defra). His involvement has raised questions among critics who wonder how fair the new system will be to struggling farmers.
The National Trust argued in August 2016 that the existing EU CAP system should not be replaced with a British likeness, but rather scrapped and replaced instead with a new system that would direct funding to those who perform an environmental service by improving the environment or helping wildlife.
However the government goes about supporting farmers after Brexit, the costs will be significant. Data compiled in our corporate welfare database reveal that the vast majority of UK corporate welfare distributed in 2015 — more than £3 billion — went to the agriculture sector, and most of it was made up of CAP funds. In Scotland, Wales and Northern Ireland, the proportion of corporate welfare that went to agriculture that year topped 94 percent.
Other potential negative impacts, detailed in the AHDB report, include downward pressure on farmgate prices due to the rising costs of trade for export products, including cereals and sheep meat, which are primarily exported to the EU. Speaking on BBC’s Today, Bicknell explained that this scenario makes UK trade deals with other nations like China quite important in the post-Brexit future.
Further, in a scenario in which restrictions may be placed on EU migrant workers after Brexit, higher labour costs would have a negative impact on farm incomes. This would be especially true in the horticulture sector, in which labour constitutes the highest portion of costs.
On the flip side, UK farmers that produce items that are mostly imported into the UK, including dairy and pigs, could see a rise in incomes due to the projected higher costs of EU imports.
Whatever happens post-Brexit, the AHDB report concludes that it is those farms which are higher-performing that are likely to remain profitable, while those that are struggling are expected to suffer losses. The report concludes that farmers should prepare by increasing productivity in order to offset possible future losses.