June 28, 2016

Brexit plunges UK agriculture industry into uncertainty

The UK's controversial vote to leave the EU threatens to end the bloc's common agricultural policy (CAP) subsidies to UK farmers, prompting industry leaders to request the government to set a clear post-EU direction for the British sector.

Until the EU referendum on June 23, farmers in UK have, for more than four decades, enjoyed the bloc's subsidies and could access key export markets in Europe levy-free, with a reach-out to 500 million consumers. As votes indicate the UK citizenry's desire to eject itself from the Union, the local agriculture industry plunges into uncertainty over issues like farm support, regulation and access to a unified market and migrant labor force.

Furthermore, it remains to be seen of UK Prime Minister David Cameron's promise to keep the support system for agriculture running even as he is set to resign in the second half of the year.  

Despite concerns of challenges pertaining to a "Leave" verdict, polls have revealed the great inclination of many farmers to vote for a departure from the EU. A Farmer Weekly poll showed that 58% of 577 farmers inquired wants the UK to dissolve its membership with the bloc. Even then, CAP support should operate undisrupted until at least the end of December 2020, and the government must ensure it, according to Ross Murray, president of the Country Land & Business Association. The UK has to negotiate for a "barrier and tariff-free" trade relation with the EU so that the agriculture sector will not be crippled by less-than-favourable conditions, he added.

The UK's "Leave" vote has delivered an economy tsunami throughout the world as the sterling fell to a historic low in more than 30 years. Will Gemmill, head of farming at Strutt & Parker, perceives a short-term advantage from the drop for UK exports which could elevate prices and improve the UK's competitiveness.

In regards to medium term though, uncertainty lingers over the monetary support farmers will receive as well as future trade with both EU and non-EU countries. Sean Richard, former NFU chief economist, prognosticated that over a course of a daunting decade, food producers may even relocate their activities to EU countries in order to keep operations within the bloc.