So now we know the result – the UK public has voted to withdraw from the EU. But what does that mean for Farms and Estates, and what happens next?
It is probable that the UK will now have to renegotiate terms of trade agreements previously concluded by the EU. To what extent and on what terms non-EU countries will be willing to establish trade agreements direct with the UK remains to be seen. Existing tariffs imposed on goods and commodities coming into the UK from outside the EU would be significantly reduced if default World
Trade Organisation rules were applied without the UK adopting its own tariff regime. This could result in cheaper imports undercutting the UK’s primary producers.
The UK will certainly have to negotiate new trading terms with the European Single Market and the level of tariffs to be levied on goods imported into the EU from the UK could be significant for many in the agricultural sector. The EU currently levies significant tariffs on many food products coming into the single market, so this could have a negative effect on the sector unless the UK is able to negotiate beneficial terms.
Free movement of EU nationals across the EU will no longer apply to the UK, unless this arrangement continues as part of a renegotiated trading arrangement between the UK and the EU. A change to these rules would mean that the existing pool of labour for UK rural businesses will be significantly reduced.
Currently, 65% of agricultural workers are non-UK EU citizens. In addition, approximately 80% of seasonal workers employed in agriculture are sourced from the EU – UK workers are reluctant to take on such short term, uncertain employment. Significant numbers of EU workers are also employed in leisure and tourism. This could result in labour shortages and/or price increases for the sector as it is forced to take on alternative, more expensive, labour.
The existing subsidy regime under the EU Common Agricultural Policy (CAP) will go. On average 55% of farmers’ income is currently received via direct subsidies via the CAP. No guarantees have been given about what, if anything, will replace this post-Brexit – although it is generally accepted that some form of alternative subsidy regime will be introduced. The fear is that the general public will balk at matching the expenditure of £3billion currently received from the EU, so farmers may find that their incomes are reduced. This could result in many going out of business. It is also probable that subsidies in the future will be more tied to environmental schemes and credentials.
One positive for many farmers is that the 3-crop rule is likely to be removed in the longer term. This has largely been seen as a requirement forced upon farmers which is inappropriate for UK farming. Equally, the UK government will be free to make decisions concerning the environment, water and flood control which are geared towards the specific needs and requirements of the UK.
The current uncertainty around use of glyphosate and neonicotinoids would arguably be removed as UK farmers are given the freedom to use products that membership of the EU might prevent. However, if the UK wishes to continue exporting to the EU single market it may find itself restricted in its freedom to use these products as part of the terms of any trade agreement entered into.
If the withdrawal of EU funding reduces farm budgets and prices for domestic food products fall to compete with imports, returns for in hand farmers and landlords are likely to be hit. Land prices could also be driven down, at least in the short to medium term. Coupled with a likely fall in sterling, this may mean that UK land becomes attractive to foreign investors. However, reduced land prices may allow more entrants into the market than at the current high prices.
If farmers' bottom lines are hit, smaller farms may go out of business and bring more land to the market.
It is hard to see significant impact on the challenges faced by the owners of historic and heritage properties. Policy in this area is largely determined in Westminster, and aside from possible impacts on the numbers of EU visitors to those open to the public and the employment concerns facing the rural sector, the impact of leaving is likely to be limited.