The EU referendum on 23 June is of major significance to farming. What are the key points on either side of the argument?
Ever since an in/out EU referendum on 23 June was announced by the Government, there has been furious debate on both sides. Claim and counter-claim have flown around like mown grass in the field!
Clearly, the vote is of enormous significance to the farming industry, not least because some 60% of the total budget allocation made by the EU to the UK goes to rural Britain.
The decision on how to vote is a personal one for every voter in this country. But for the farming community – where personal and business considerations are so tied up together – it is perhaps especially complex.
It is not our place at Stephens Scown to tell anyone how to vote. And so we are not seeking to influence anyone here.
But everyone in the industry should be thinking very carefully about the issues so as to try and reach a truly balanced and informed decision – including an understanding of how their business could be affected.
This may be easier said than done when more heat than light is generated and politicians seem to jump on every development as an opportunity for another soundbite!
That said, there have been a couple of substantial and informative reports produced recently on the potential effect of Brexit on farming: “Leave or remain” from the Country Land and Business Association (CLA) and “Agricultural Implications of Brexit” from the Worshipful Company of Farmers (WCF).
Neither report comes down on either side; both remain objective and neutral. But what are the key issues they identify?
Subsidies and the CAP
For farming, one of the key issues is the EU subsidies that we receive – through the Common Agricultural Policy (CAP). According to the CLA, in 2014 UK farmers received 54% of their income through such direct support. On the other hand, as the WCF points out many criticise the support mechanisms as being “badly targeted, inefficient and poor value for public money.”
Were the UK to leave the EU, what would happen around direct support? Would it be maintained but just in a different form? The short answer is, whilst clearly support would not just disappear overnight, we simply don’t know exactly where policy would come to rest. As the WCF puts it: “There is nothing pre-ordained about the outcome.”
Trade with the EU
The other major issue is around trade with the EU. The 27 other countries in the European block form a huge market for UK farmers. For example, more than 90% of UK beef and lamb exports – worth around £605 million – currently go to the EU.
If we left the EU and its market of some 500 million people, would we suffer from higher tariffs in order to trade with them? As the CLA says:
“Most campaigners agree that in the event of the UK leaving the EU, the UK and the EU would want to secure some form of substantial trade agreement. Whether this new relationship would be better or worse for UK business is one of the main issues in the referendum debate.”
The CLA then points out that ‘leave’ campaigners are confident that a trade agreement that is “as good if not better than our current trade relationship” could be reached; while ‘remain’ campaigners argue that “the UK is unlikely to secure an advantageous trade agreement that equates to existing single market access.”
So who should you believe? The simple fact is that there’s no cast-iron way of knowing. As the CLA states: “There is no precedent for a member state leaving the EU.”
Negotiations whatever the outcome
One thing that both reports make clear is that, whatever the outcome, the story will not end on 23 June – there will be plenty of negotiation thereafter.
If we were to vote to leave the EU, then there would follow a (doubtless very intense!) negotiation period covering every aspect of our exit that would most likely last for around two years – possibly more. The UK would not actually leave the EU until those negotiations had been completed.
But even if we voted to stay in the EU, then attention would need to turn to the CAP where the present agreement is due to run out in 2020. This would then become the focus of efforts, to negotiate the best possible deal for UK farming and introduce any reforms in the way it is administered.
What to do now?
Brexit is a complex subject with many variables. To an extent, anyone can pick and choose which bits they want to hear. For example, the WCF says that some of the changes caused by leaving would cause some farmers “disruption and hardship in the short run” – but a few paragraphs later says that “there could be a catalytic effect of Brexit with beneficial long run effects for the sector as a whole.”
Ultimately, it’s up to us all to make up our own minds. Bear in mind though that the debate is constantly evolving, so the picture in June may have moved on from the picture now.
From our soundings with clients in the industry, opinion is roughly 50-50! So at the very least, the possibility of Brexit needs to be taken seriously. You need to ask yourself what the most likely effects on your business would be.
In the meantime, I do recommend that you take a look at the CLA and WCF reports which can be found at the links below – or feel free to contact me to discuss.
If you have a question or query for Phil Reed, head of rural and partner, please email rural@stephens-scown.co.uk or call 01726 74433.