Brexit: ‘there are no certainties in this game’

Agriculture market participants on both sides of the Brexit debate are putting their cases, but where does that leave businesses?

There is no way of knowing which way the UK referendum on EU membership this summer will turn out. But if Britain does vote to leave, UK agriculturalists would do well to start raising their voices to influence the future of the country’s agriculture as soon as possible.

How Brexit might help or hinder UK agriculture, from land prices to farm businesses and food processors, is a matter of complexity and speculation. In Britain, the agricultural debate over staying or leaving the EU is mostly being argued out in numbers and estimates, but these can be vague or vary wildly depending on who you talk to.

Payments to UK agriculture from the European Agricultural Guarantee Fund have risen from £2.5 billion in 2008 to £3.12 billion in 2014. In a worst-case Brexit scenario with minimum funding, high EU tariffs and less-than-favourable international trade deals, 90 percent of farming businesses could face serious financial difficulties or even fold, says one report from consultancy Agra Europe.

The UK’s Minister of State for Farming, Food and the Marine Environment George Eustice has now turned out in support of a Brexit, and says the government could provide its own subsidy package for farming worth £2 billion. But Farmers for In, the recently formed anti-Brexit campaign group, have signed a public letter casting doubt on Eustice’s claim that the British government’s support would be comparable to that provided by the EU.

For some investment professionals, it is this lack of clarity that turned them away from Brexit in the first place. When I asked Savills’ agribusiness director Andrew Wraith recently where he stood on the issue, he said: “The breadth of what we have to go through looks too much”. Wraith said he understood full well the complexities of how a Brexit could affect farmland investment, with grazing land prices most likely to be hurt by any reduction in subsidies. But there were few certainties on what Brexit would mean for UK agriculture without a clear idea of what tariffs, deals and subsidies will be available for agribusinesses after Brexit.

This uncertainty, of course, troubles many. In February, when agricultural specialist professor Allan Buckwell gave a talk for (and funded by) farmers and agricultural investors at the London farmers’ livery company, the Worshipful Company of Farmers, the point that registered most powerfully with his audience was: “There are no certainties in this game.”

As Buckwell had it, the list of burning questions is long and difficult to answer: “What will be the fate of direct payments in terms of funding level? In terms of eligibility and type or adjustment period? Will these be given as a bond, so that you can sell your entitlement to whatever number of payments are left? What tariff position can we negotiate with the EU? Could tariffs even be punitive? What about how this will affect land prices and food prices? Every one of those things will be open to negotiation. There will be an intense debate,” said Buckwell.

Interest groups are in a position to help shape the implications of Brexit for British agriculture, and whatever their views, it is in their interest to get involved fast. In the run up to the referendum, debate about agriculture is happening, but it will need to be much wider and deeper if the UK votes to leave the EU.

As Buckwell put it: “Until that [debate] happens, and we see it happening all around, we are in deep uncertainty, and business does not like deep uncertainty.”