Will Brexit hurt our farmers?

A farmer holding a lamb © Alamy
Will farmers cope away from the EU herd?

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.

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.

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% would destroy 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.

  • DiverPhil

    When Brexit is finally on us the question of subsidy levels will be a big debate and if our GDP suffers we will all have to swallow the economic impact everything will be trimmed there will be no sacred cows! its coming.

  • David Williams

    You would be surprised how many of us voted out because of the pound, I did, with so much of our food imported it was obvious what would happen, and so long as we feed our stock grass we will be better for it.

    • FWIW

      So to clarify, you thought that investors would assess Brexit as being bad for the overall UK economy and therefore the pound would drop, and you thought that they would be correct in that view, therefore the pound would remain low rather than bounce back when the benefits of Brexit became apparent?
      Based on that view, you went ahead and voted for Brexit.
      Seems a bit selfish if you don’t mind me saying so.

  • Phil Harvey

    Generally farmers work very hard and I fully support rural subsidies. However, we need to ask what exactly we are buying . At present, we have gross distortions resulting in fewer (larger) farms, fewer people on the land and a systematically impoverished environment. The whole rural subsidy regime needs to be re-examined to ensure that subsidy goes to all who strive to make a living in rural areas, and not just into farmer’s pockets. There should be a bias towards smaller family farms and every farm should have an access plan and conservation plan before any subsidy is paid. Subsidy should be extended on a comparable basis to woodland creation as well as agriculture. The NFU has dictated farming policy and subsidy regimes for far too long – Brexit gives the UK a chance to develop a much more balanced and equitable rural subsidy regime and one that can be fully supported by those who pay for it.

    • FWIW

      “The NFU has dictated farming policy and subsidy regimes for far too long”
      So we are leaving the EU in order that we can clip the wings of our own National Farmers Union?
      I always thought Taking Back Control was a phrase that could be interpreted in too many ways.

  • Mike N

    Yes, and No. Firstly Not all farmers are landowners, and vice versa. Farmers will suffer, land owners may not ( many only own land to avoid IHT ). Without subsidy farmers will go to the wall unless the public are prepared to pay more for their food ( non-starter ). As an alternative suggestion a rolling 5 year opt in or opt out support programme. Opt out and take your chances on the world stage (no support and no interference). Or opt in and receive support but constrained by delivering what the government/electorate want from the countryside, combined with more stringent rules defining a working farmer.