Farmers sweat as Brexit negotiations enter extra time

Farmers sweat as Brexit negotiations enter extra time

Britain is now just days away from the UK leaving the EU. After four years and three Prime Ministers, the negotiators, led by Boris Johnson and European Commission President Ursula von der Leyen (and their teams) still cannot commit to a deal or leave the table. Instead, both sides have embarked on a further round of negotiations.

This week, the UK’s tabloid newspapers have described the trade talks with  perhaps an unsurprising football focus as entering ‘extra time.’ But for the UK’s food and agricultural sectors, the only thing on everybody’s mind is penalties.

 

A game of two halves

Playing for penaltiesThe NFU has claimed that livestock farmers will lose between 60% and 80% of their income by 2024 as a result of the reduction and loss of EU grant funding.

There is an increasing backlash from UK Farmers who are being told that the Agricultural Transition Consultation is going to be ‘brilliant’, without any real insight or detail as to what ‘brilliant’ actually means to their farm, place in Britain’s economy, their own communities or their balance sheets.

Secretary for the Environment, George Eustice, incited the ire of the agriculture industry when he described a list of, “new opportunities for British farmers”, as a consequence of the punishing tariffs on EU exports after January 1st, 2020.

Much is made of the fate of the UK’s primary producers. With the government set to ban live export, sheep farmers will be hit with a 48% tariff on the export of meat. Consider that 33% of Scottish Lamb is exported and 98% of that to the EU, where it is especially highly desired in France and Italy. Beyond the threat of lorries carrying sheep for live export to Europe backing up on the M20 through Kent growing daily, the prospect of sheep farmers going out of business entirely by the spring is real. Dairy farmers and beef producers fair no better, more than 80% of beef exports (not sold in the UK) go to the EU and around 80% of dairy produce goes in the same direction. The future is particularly uncertain.

In response to the prediction that a typical UK family farm can expect a 50% cut in subsidy over the next four years, the government created the Agricultural Transition Plan. The NFU among others has branded it as at best ‘simply unrealistic’ and at worst as “laughable” (Jen Craig, Chair of the NSA (National Sheep Association in Scotland). An agenda for 2024 that champions the environment is compelling, but not to those farmers that would be left so badly out of pocket by a ‘no deal’ Brexit, that they would out of business by the summer. Simply put, a farmer couldn’t claim subsidies for promoting the environment, if they’ve already had to sell their land.

 

Consumers penalised

Playing for penaltiesThe UK currently imports up to 30% of its food from the EU.

If Britain leaves the EU without a deal, we could see import taxes on products that weren’t previously imported. For example, imported cheese would be subject to a 50% import tax. This would be highly likely to be passed on directly to the consumer.

Leaving the EU without a deal would have an immediate impact on British consumers. Ian Wright, CEO of the Food & Drink Federation, has described the negotiations process as a ‘complete shambles’ and has been quoted saying that he expects a price rise between 5% and 15% from mid-January.

 

A game of two halves

The negotiation continues (despite another failed deadline on 13th December 2020) with an intensive focus on two principal issues that, despite being the subject of ‘constructive conversation’, are entirely unresolved.

  • Free and fair competition
  • Reciprocal access to markets and waters

 

The penalties of the UK leaving the EU without a deal (what Johnson describes as the ‘most likely outcome’) continue to be cast in more stark relief, especially for primary producers in agriculture and industrialists.

 

The impact on working capital for UK producers

For the team at Woodsford TradeBridge, as specialists in working capital, it’s both our duty and in our nature to say, “plan, stockpile, consider scenarios and always remember that cash is king”.

It was not lost around our meeting table that retail giants like Tesco have been Brexit scenario planning for two years, and stockpiling warehouses for many months.

However, to my mind the issue is political. Surely either the UK wants an internationally competitive food and agricultural sector with everything that entails, or not?

The financial implications of Brexit are set to hit the UK, its consumers, and businesses. They could have an immediate, real impact and this will all happen in the next two weeks.

To be continued …

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