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UK farmers would be worse off outside of EU

September 1, 2015 4:24 PM
By Alan Bullion

By Alan Bullion


What effect would 'Brexit' have on the UK's vital farming industry? While the exact shape of UK agricultural policy in the aftermath of a referendum vote to leave the European Union is of course unclear, it does seem highly likely that direct support payments, which currently make up a large part of average farm income, would be scaled back significantly and could even largely disappear.

This would have a huge impact on our farming sector, and the 600,000 jobs that directly depend on its continuing prosperity. Some £10 billion in annual revenue is earned from British exports of food, animal feed and soft drinks. Furthermore, one-third of total UK lamb production is shipped aboard.

Some idea of the sort of agriculture policy that the UK might operate under the current Conservative government can be discerned from a document produced by the 'Fresh Start' group published in 2013.

Although this policy outline was essentially a wish-list on the terms for continued membership of the UK in the EU, and heavily influenced by sceptics, it can safely be assumed that it reflects the broad approach likely to be followed by Prime Minister David Cameron in a post-Brexit scenario.

Not only is the Common Agricultural Policy (CAP) seen as excessively expensive, but "EU farmers are also protected by tariffs, which distort trade, raise food prices in the UK, and harm farmers in the developing world".

Under this blueprint for change the most contentious instrument of the CAP, direct payments to farmers in Pillar One (P1), would be phased out.

Willfully ignoring the fact that most of the bureaucratic burden for the farming industry arises from national, rather than EU, health and safety and food safety legislation, the document says "there should be a parallel reduction in red tape and regulation in order to ensure a globally competitive farming sector".

So the two main conclusions which can be drawn are that direct subsidies to producers would go and protective tariffs would come down.

Bleak future for most farms

Under the 2007-2013 version of CAP, EU support payments to British farmers totaled around €3.2 billion a year. For individual farmers, these payments, amounting to around €200 per hectare, generally represent around 35 to 50% of their total gross income.

For a majority of farms, this represents the difference between profit and loss. Only super-efficient farmers ranking in the top 10% could survive without them.

The dire straits into which the UK farm industry would be plunged by removal of the direct aid payments which now form the backbone of the CAP can be judged by most recent farm income figures.

According to DEFRA's latest Farm Business Accounts report, over a fifth of mixed and grazing livestock did not make a profit in 2013/14, while more than 20% of dairy farms had a net income of less than £25 000 (€31 738).

Approximately 20% of cereal growing farms failed to make a profit in 2013/14 - compared with 9% in the previous year. In both cases, the Single Farm Payment (SFP) formed a major part of the farms' gross income.

Old pack of Anchor Butter (Archives New Zealand: https://www.flickr.com/photos/archivesnz/)Limited support payments

It is likely that following EU withdrawal, direct support would be paid only to hill and moorland farms, with limited environmental payments elsewhere, farmers mainly dependent for their returns on a less than certain world market, and much less protection from lower priced imports.

The consequences would likely to be that land prices would fall, banks would foreclose on loans based on high land prices, and bankruptcies would be widespread.

The numbers of small and medium sized family farms would further decline and agriculture would become even more industrialised as small farms would be absorbed into even larger arable and livestock units.

Only the large unit with low marginal costs would be able to survive on a fluctuating and uncertain world market.

UK food self-sufficiency would fall and much more of the UK's grains and livestock product needs would have to be imported from North and South America, Australia and New Zealand, ironically leaving us more food insecure.

Norwegian approach

In any event, the UK would need to continue trading with continental Europe, which will involve negotiating some kind of post-membership trade relationship between the UK and the EU.

The 'Norwegian approach' to access for a non-member country to the EU market is often cited by sceptics in the UK as a viable alternative to full membership. Norway is widely viewed as being an economically successful northern European state which has flourished outside of the EU, and one of the few remaining European countries which are not either already an EU member state or destined to become one.

But as far as the agriculture sector is concerned, such an arrangement would be a positive disadvantage. Access to the EU market would be possible only if EU sanitary, phytosanitary, labelling and other rules are complied with. All the EU regulations would still apply, but Britain would be without any say in their design or administration.

To gain access to the EU market, Norway and other members of the European Free Trade Association (EFTA) have to apply almost all EU legislation on free movement of goods, services capital and people, as well as rules on employment, consumer protection, environmental policy and competition. Most of the so-called 'EU bureaucracy', the bête noir of the eurosceptics, would thus still have to be complied with.

Dire Irish consequences

The consequences of Brexit would be much more significant for the UK and UK farmers than for the EU. On the trade side, the EU accounts for 62% of UK exports and 70% of UK imports of agri-food products (2013 figures).

On the other hand, the UK takes just 8% of the agri-food exports of other EU member states while it supplies just over 3% of their imports. Therefore, while the UK can be seen as an important market for the EU agri-food sector, overall it is clear that the UK agri-food sector is much more dependent on EU markets than the EU is on the UK.

However, for some EU countries and some products, trade links with the UK are much more important. This is particularly the case for Ireland, often overlooked, which imports 61% of its intra-EU imports from the UK (accounting for 53% of its total agri-food imports), while the UK takes 59% of its agri-food exports to the EU (44% of its total agri-food exports).

Thus, Brexit would imply considerable disruption to Irish agri-food trade. Further complications could arise if border controls again become necessary on trade with the UK because Ireland is the only country with a land border with the UK which is extremely difficult to police.

The main conclusion is that withdrawal would have dire consequences for most British and Irish farmers, producers, processors, and our future food security, as well as policies which have helped to preserve our green and pleasant countryside. Still more reasons to vote to remain inside the EU.

Dr Alan Bullion is a member of the European Movement National Executive, has stood for the European Parliament and Westminster for the Liberal Democrats, and writes on agricultural policy for Agra Europe and other publications.