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UK beef and lamb farmers most at risk from Brexit, report shows

Beef and lamb production may no longer be viable in parts of the UK under a ‘worst case’ post-Brexit scenario, according to an important new study published today (October 11).

Prospects are far brighter for the pigmeat sector however as producers are likely to benefit from changes to trading arrangements once the UK leaves the EU.

Unveiled by agricultural levy board, the AHDB, the report Brexit scenarios: an impact assessment, for the first time quantifies the potential impact of Brexit on UK farming businesses.

Produced by Informa Agribusiness Consulting, part of the same group as IEG Vu, in association with Promar International, the analysis projects the effect of different trading arrangements, farm support measures and labour availability.

The three scenarios are outlined as follows:

  • Scenario 1, dubbed ‘Evolution’, is essentially a ‘business as usual’ approach with current levels of support, albeit with additional costs of trading.
  • Scenario 2 (‘Unilateral Liberalisation’) assumes a liberal approach to trade with tariff-free access to the UK and reduced support. Migrant labour would be reduced by 50% for regular employment and there would be a small saving from some relaxing of the regulatory framework.
  • Scenario 3 (‘Fortress UK’) would dramatically reduce support payments while reverting to WTO most favoured nation tariffs with the exception of the existing tariff rate quotas for imports of New Zealand lamb.  As with Scenario 2, migrant labour would be restricted by 50%, but this time for regular and casual positions.

Farm closures likely

The report highlights the vulnerability of sectors where direct support has been a key part of farm revenues. Beef and sheep farming falls into this category but the pigmeat sector does not.

Under the so-called ‘Fortress UK’ cliff-edge scenario, it says average farm business income would become negative for sheep and beef farms in less favoured areas (LFAs). FBI for lowland sheep and beef farms would be positive, but only just.

Some LFA sheep farmers are expected to abandon the sector even under the second ‘unilateral liberalisation’ scenario. But this is even more likely under the ‘Fortress-UK’ option.

“The best managers will try something different – this might be the better use of genetics, the use of online selling, or the development of diversified activities and/or off-farm jobs – but many others will be unwilling or unable to do this and simply will not be able to survive financially with their traditional way of farming,” the report notes

“This could have serious consequences for the farming environment and social infrastructure of the LFA regions,” it notes.

Sheep farmers are seen as more likely to exit the sector than beef producers, not least due to the loss of export markets and relative lack of domestic demand for upland sheepmeat.

Pig farms in the pink

In contrast, UK pig farmers are expected to benefit from higher prices, caused by the additional cost of imports. With public support payments not an important factor in the pig sector, FBI is seen rising under all post-Brexit scenarios.

While the ‘Fortress-UK’ option would see increases in production and new investment however, the report says access to labour and managerial expertise would remain a key barrier to growth. Potentially large increases in FBI would also be reduced by problems extracting value from parts of the carcase for which there is no demand within the UK.

Whichever scenario is chosen, higher-performing farms remain profitable in every sector. These farms are best placed to weather the negative impacts of any of the Brexit scenarios.

AHDB Market Intelligence director Phil Bicknell says this underlines the need for farms to start working on ways to improve their performance as way of mitigating potentially negative Brexit impacts.

“Buzzwords like competitiveness, resilience, productivity are not new to agriculture but Brexit brings renewed focus on farm performance. Do nothing and businesses that are currently profitable run the risk of heading into the red. There is plenty that individual businesses can do now to get fit for the future,” he concludes.

'Quantitative modelling for post-Brexit scenarios' is published by the UK Agricultural and Horticultural Development Board (AHDB) and produced by Informa Agribusiness Consulting, in association with Promar International.

For more information on the the agri-food economic & policy analysis services offered by Informa Agribusiness, follow this link: www.ceasc.com

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