Farming and an EU exit
The highly anticipated referendum on the membership of the EU is getting ever closer – the 23rd of June.
The prospect of a Brexit has already had exchange rate and share price implications for the UK as a result of the uncertainty around the result of a vote. There will be increasing levels of debate with potential implications set out by both sides as we approach the vote and here we will look at some of the specific issues impacting on the agricultural sector.
Common Agricultural Policy and Subsidies
Currently, the CAP represents almost 40% of the EU budget and the largest element of the UK’s EU costs. Leaving the EU is likely to reduce subsidies received by farmers as it is unlikely that the UK or devolved governments will provide the same level of investment as grants. Even if levels were maintained, at least in the short term, there is a view that “returns” are likely to be sought from farmers in other ways, such as increased environmental measures.
Exports and Imports
The position with cross border trade is less clear. Leaving the EU would bring an end to the open trade across borders in both directions.
With the need to renegotiate free trade agreements for separate sectors or product types, at least in the short term, the inability to freely sell to the EU could impact on these exports.
However, the free borders which enable imports to enter the UK easily at the moment would also be renegotiated and therefore foreign produce in shops would potentially reduce, exchanging the export for a domestic market.
Leaving the EU would also enable the UK to renegotiate our own trade agreements with countries outside the EU and, due to the more specific focus, these could be more beneficial than the existing EU wide agreements.
There are many areas of employment law which originate at European level including agency, part time and fixed term worker rights and the working time directive. These have all had a significant impact on the agricultural sector and have limited the flexibility of employee structures.
Leaving the EU could result in these being repealed and the flexibility reintroduced. However, many of the regulations have been in UK law for a number of years and their repeal is likely to impact on morale of employees and therefore impact on productivity. The most likely outcome in the longer term is seen to be a middle ground negotiated between politicians, Trade Unions and other organisations.
These are just 3 of the key sector issues which will be impacted by the vote. If the referendum result is that of a Brexit, there will be a transition period, but the uncertainty is only likely to increase during that time. Therefore, it is sensible for farmers to start to develop flexibility in their funding to ensure they can weather any storms that may be approaching on the horizon.
The NFU Council has this week resolved that, on the balance of existing evidence available at present, the interests of farmers are best served by our continuing membership of the EU. (The NFU state that it will not be actively campaigning in the referendum and is not advising its members how to vote. Whether the vote is to stay or to leave, it will always lobby to obtain the best possible deal for British Farmers).
For more information, please contact Tracey Richardson.