No-deal Brexit would have "seismic impact" on farming industry, says report
PUBLISHED: 14:22 04 February 2019 | UPDATED: 14:35 04 February 2019
As the Brexit countdown continues, a farming economics report has outlined the "seismic impact" which a no-deal departure from the EU could have on agricultural and food businesses.
The latest Horizon report published by the levy-funded Agriculture and Horticulture Development Board (AHDB) examines how both an “orderly withdrawal” and a no-deal scenario would affect trade across the UK’s main farming sectors.
It explores which goods would be most affected by the imposition of World Trade Organisation rules if no deal is agreed with the EU, and says UK exports of agricultural and horticultural products are likely to be “rendered uncompetitive” if WTO tariffs are applied to our exports.
That could have a major impact on key East Anglian sectors like cereals and pork production. The report says tariffs on UK pork exports would lower their competitiveness in the EU market, where the UK currently ships around 60pc of its pig meat. And as the UK is a net exporter of barley, a staple Norfolk cereal crop, exports could be hit with tariffs of €93 a tonne.
But if the government decides to drop all tariffs on imports from the EU this would have to apply to the rest of the world, meaning East Anglian food producers could face increased competition from global producers whose costs and standards may be lower than the UK’s.
AHDB senior analyst and report co-author Amandeep Kaur Purewal said: “The prospect of a no-deal scenario cannot be ignored. This would have a seismic impact on UK trade in agricultural and horticultural products, with major implications for the farming sectors.
“It is crucial farmers and policy makers fully understand the potential consequences of leaving the EU, whether in an orderly or disorderly manner, if we are to avoid massive disruption throughout the industry.”
AHDB report, sector-by-sector analysis
• DAIRY: For dairy, tariffs would cause issues for cross-border trade between the UK and Republic of Ireland – large volumes of UK milk are exported to Ireland for processing, then the processed product shipped back (for example Cheddar cheese). Tariffs under ‘no deal’ would make this trade less economical. If the UK government unilaterally drops import tariffs, increased competition from other global exporters would reduce the opportunity of import substitution for dairy products. Conversely, if tariffs are imposed on all dairy imports, domestic prices are likely to rise.
• SHEEP: The sheep meat sector is likely to be the worst hit by a no-deal Brexit. UK exports would suffer considerably if WTO tariffs of up to 50pc of the price of meat were put in place – a huge blow to the UK’s competitiveness. In addition, around 90pc of UK sheep meat exports are to the EU, meaning “no deal” is likely to hit sheep farmers’ incomes.
• BEEF: For beef, exports to the EU would also be limited considerably if tariffs, which are sometimes as high as the price of the product itself, came into play. Again, if the UK government drops tariffs on imports, UK beef could see increased competition, meaning lower prices and returns for farmers.
• PORK: Tariffs on UK pork exports would lower their competitiveness in the EU market, where the UK currently ships around 60pc of its pig meat. UK sow meat, for which there is low domestic demand, is exported to Germany for processing into continental sausages and then sent back to the UK – tariffs would make this process uneconomical. Tariffs on imports would increase domestic prices but UK pork would face increased competition and lower prices if tariffs are dropped, as well as potentially competing with products produced to lower or different standards.
• CEREALS: For cereals, the UK is a net exporter of barley, meaning exports could be hit with tariffs of €93 a tonne outside a tariff rate quota (TRQ). The UK flour trade could see considerable disruption even if there is a free trade agreement between the UK and EU as rules of origin would still apply, disrupting trade with the Republic of Ireland.
• POTATOES: For potatoes, there may be additional phytosanitary controls on fresh and seed potato trade between the UK and EU, which would likely make the certification process longer, increasing costs for businesses. Given that 99pc of the UK’s imports of frozen potato products come from the EU, there may be an opportunity for import substitution if import tariffs were in place but considerable investment would be needed to capitalise on this.
• HORTICULTURE: For horticulture, the UK is heavily reliant on imported fresh produce so import tariffs would make these more expensive. In addition, tariffs on inputs such as fertilisers and pesticides would increase costs of production for growers. If there are no import tariffs, this could open the door for increased volumes of imports, increasing competition and possibly lowering phytosanitary standards. Growers could be unable to respond to any opportunity created for import substitution if import tariffs are put in place due to the critical shortage of competent seasonal labour in the UK.