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Duncan Sigournay



23rd May 2018



Countdown to Brexit – agriculture

Much has happened in the twelve months since the Prime Minister triggered Article 50. But as a sector, are we actually any further forward?

For a start, Defra has taken on an extra 1,200 staff to work on Brexit, reversing years of declining staff numbers.

The Tenancy Reform Industry Group (TRIG) was reconvened in 2017 at the request of the Secretary of State tasked with suggesting improvements to boost productivity on tenanted land in the context of a future outside of the EU. Given other legislative demands that are being placed on the Government, it remains to be seen whether there is any appetite for significant tenancy changes in the immediate future.

In February 2018, Defra launched a consultation on the future for food and farming and the environment in a ‘Green Brexit’. Within its Command Paper, the concepts of ‘natural capital’ and ‘public money for public goods’ appear to be the guiding principles behind English payments to farmers and landowners once direct support is phased out. Many, however, see it merely as a vehicle for the Government to win over younger voters with an overtly ‘green’ agenda or for the Secretary of State to stake a claim for higher office in due course.

Despite all the inherent uncertainty around a future post-Brexit, the Rt Hon Michael Gove and his ministers have been remarkably transparent in their thoughts on many Brexit-related issues. In particular, the Government has committed to a sector-specific transition period over and above the one recently agreed with the EU up until the end of 2020. During that initial transition/implementation period, the UK will continue to pay into and receive funds from the EU budget and be required to follow EU rules including the CAP.

The additional sector-specific transition period would run from 2021 until the end of 2024 and is intended to prepare the sector for life without direct support. As things stand, the timetable for events for the agriculture sector will be:

  • 2019 – same rules will apply as for 2018
  • 2020 – Basic Payment Scheme (BPS) will remain but with some kind of capping on payments likely to be introduced. Where the cap falls and how quickly that will be extended is unclear at present
  • 2021 – likely to be as per 2020
  • 2021 and 2022 – at some point during this period there will be the introduction of a domestic agriculture policy and the phasing down of direct support
  • 2023 and 2024 – commencement of the roll-out of ‘public money for public goods’ schemes
  • 2025 – no more direct support in the UK

It is also believed that payment rates will taper down in the period 2021 to 2024 in order to wean farmers off direct payments and to release funds for other programmes.

Notwithstanding that Defra has shown itself to be one of the more proactive Government departments, there remains a number of issues for the sector to deal with, in particular those around migrant labour and trade.

Although arable and livestock farming are not particularly exposed on this issue, up to 90% of horticulture’s workforce are EU migrants. Likewise there are high levels of reliance on migrant labour in the food processing, veterinary and transportation sectors. There has been talk of the reintroduction of an initiative similar to the Seasonal Agricultural Workers Scheme, but many are pushing for a far wider scheme since many EU workers are employed in the UK all year round.

Similarly, the issue of our future trading relations with the EU and the rest of the world remains key for many in the sector, especially for the sheep sector which is heavily reliant on exports with France. Unfortunately we are still waiting for further information on the likely shape of our future trading relationship with the EU. Indeed, there is now talk of a ‘customs partnership’ and ‘maximum facilitation’. New terms seem to be springing up all the time.

For the many farmers who have experienced higher BPS payments due to the weakness of the pound, and those who have read about extended transition periods and the like in the farming press, there may be the temptation to think that nothing has really changed.

However as the Agriculture and Horticulture Development Board’s 2017 ‘Brexit Scenarios – an impact assessment’ report suggested  higher performing farming businesses stand a better chance of weathering Brexit. With that in mind, it really is never too early to begin auditing your business to assess where improvements in profitability and productivity can be made.

At the recent Worshipful Company of Farmers’ annual lecture on the subject of Brexit, much was made of the need for greater collaboration between farmers, both intellectually through knowledge transfer and via joint venture projects. There is no shortage of information within the industry – the challenge lies in its dissemination and practical application. Proper and thorough benchmarking is still to really take off.

If the inherent uncertainty over what the future holds in terms of trade, support payments and the like is not incentive enough for farmers to really interrogate everything they do to improve efficiency and productivity, it is difficult to know what will.

On a positive note, Brexit and the political machinations around it over the past twelve months has done little, if anything, to undermine the aspirations of new entrants to the industry.

The last year has undoubtedly been frustrating for many. Let us hope that some meaningful progress can be made on the trade negotiations over the coming months so that we begin to see some light at the end of the tunnel.

If you would like to discuss any aspect of this article, please get in touch with Duncan Sigournay or your usual Thrings contact.

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Duncan Sigournay -
Partner

Duncan Sigournay
Partner

2 Queen Square
Bath BA1 2HQ

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