Britain's farmers voted for Brexit yet many rely heavily on EU subsidies, migrant workers and exports to Europe. Are they facing catastrophe? Simon Wilson reports.
Did farmers vote for Brexit?
The majority of them, yes 58%. No doubt some were attracted by the idea of having more national control over subsidies, and freeing UK farmers from some of the 2,715 EU laws that govern the Common Agricultural Policy (CAP) and the further 1,918 that govern the environment and food safety. It is unlikely that many were motivated by the prospect of sending the pound crashing in value and thus giving their exports a lift. This was the immediate outcome of the Brexit vote for the UK's 70,000 sheep farmers. Unlike pig and poultry farmers, sheep farmers haven't been whacked by rises in the cost of imported feed (since sheep eat mostly grass). Instead, the plunging pound made their lamb much more competitive for now.
In many respects, farmers' support for Brexit was very surprising. For one thing, subsidies payable under the EU's CAP account for an average of 55% of farm income and there were no guarantees (despite the assurance of Leave campaigners such as the pro-Brexit farming minister George Eustice) that such subsidies could continue post-Brexit. For another, Brexit has the potential to radically disrupt the supply of cheap labour from relatively poor eastern European countries (see box). And for a third, some 73% of agri-food exports go to the EU. In the absence of a successful trade deal with the EU post-Brexit (a possibility that looks plausible), that dependence means UK agriculture potentially faces catastrophe.
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Could that really happen?
Yes. Currently, the EU27 export twice as much food to the UK as vice versa, so Brussels has an incentive to agree a deal. But if the worst came to the worst, tariffs on meat products of 60% woulddestroy the business model of UK livestock farmers, for example. Any new trade deals are unlikely to prioritise the interests of UK farming, since they make up just 0.7% of GDP. So UK farmers are likely to face more competition from cheap food imports after Brexit. Recent research commissioned by the National Farmers' Union projects jumps in imports of everything from beef and poultry to butter and milk.
What about the subsidies?
The signs are mixed. Michael Gove (the new minister for environment, food and rural affairs) recently told farmers that the UK government would continue with the same subsidy regime until 2022. That's good news: if the prop of CAP support were simply removed, land prices would crash and put 90% of farmers out of business (according to the consultancy Agra Europe). Even so, 2022 is only three years after the planned date of Brexit and Gove didn't make any promises about what happens after that. Moreover, one of Gove's advisers, Oxford economist Dieter Helm, accused farmers of "subsidy addiction". Helm was not just talking about CAP payments, but all the other tax perks that agricultural businesses enjoy: VAT-free red diesel for their tractors, exemption from business rates and the absence of inheritance tax on agricultural land. He also mocked farmers for getting £3bn in subsidies to help them produce outputs worth just £9bn, or 0.7% of GDP.
Why subsidise farmers at all?
That's a question we are certain to hear posed more often, and more loudly, post-Brexit. The basic case in favour of subsidising agriculture is that it is both a strategic sector of the economy (Britain imports about 40% of its food, and has a large food-processing industry that accounts for about an eighth of the economy) and one that is uniquely prone to outside shocks (such as weather or disease). Also, farmland accounts for 70% of the total area of the UK; farmers and landowners have a vital role to play in managing and protecting the environment, and should arguably receive some public subsidy for their role in doing so. But subsidies may not prove politically sustainable once they come direct from the UK Treasury. Every penny (or every £3bn) the UK allocates to farm subsidies is money that lots of voters would rather see spent on the NHS, social care, education and so on.
So subsidies will fall?
In the longer-term, almost certainly. The think tank Policy Change published a paper recently ("Farming Tomorrow") arguing that all subsidies to farmers should be phased out over five years from 2020 to 2025, and government should instead focus any financial support on their role in protecting the environment. Gove hasn't gone that far. But he has implied that future subsidies post-2022 will be dependent on wider environmental benefits. For now, the road ahead for Britain's farmers looks muddy and full of potholes. With his characteristic optimism, Gove says we need to embrace Brexit as a "once in a lifetime opportunity to reform how we care for our land, our rivers and our seas, how we recast our ambition for our country's environment and the planet". It's a bold vision; all that's needed now are some concrete policies.
Who will pick the strawberries?
Britain's food-processing industry is dependent on EU migrants (they make up 120,000 of its 400,000 workers). So, too, are the horticultural and fruit-farming sectors expanding and profitable sectors which largely rely on hand-picking and face massive labour shortages if access to low-skilled EU labour is curtailed. UK farms need about 85,000 seasonal workers annually to help harvest crops, and the effects of the Brexit vote were already being felt last autumn, says The Economist. The percentage of seasonal EU workers who failed to turn up for jobs they'd accepted rose from 2% at the start of 2016 to 8% by September. This autumn, reports abound of farms struggling to find workers. Partly, that's due to the rising prosperity of countries such as Poland and Romania; partly the sinking pound. Who will pick the strawberries in future? Probably the same as pick the carrots now. The machines.
Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.
Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.
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