Agriculture | Brexit
Ben Sharples MRICS FAAV
Posted on 5 Jul 2016

The UK and the EU – a Brexistential Crisis for agriculture?

Now that the dust is settling on the decision by the UK to “Brexit”, thoughts are turning to life under the new regime. The first point to note is that Article 50 of the Treaty on the Functioning of the European Union 2010 allows for a two year negotiated withdrawal. So for the time being, it is business as usual.

Financial Support

It seems entirely predictable that the Basic Payment Scheme (“BPS”) system will be just about working by the time it is phased out! BPS applications are likely to be made in May 2017 and indeed 2018 as the line of least resistance would be to keep the existing framework in place.

The first imponderable is what will happen to a 2018 application as by the time the December payment window rolls around the UK will have left the European Union. Applications will have been made for money that will not be paid out – by Brussels at least.

The next question is what level of support will be in place post 2018? David Cameron gave a commitment to continuing support for as long as he is Prime Minister but events have somewhat overtaken him. Those advocating to leave the European Union would argue that the threat of reduced subsidy payments from Westminster is a small price to pay to be free of the burden of Brussels’ red tape. Those on the remain side would argue that we currently are beneficiaries of 40% of the EU budget and it seems unlikely that Westminster will be equally generous to the agricultural sector. The reality is, like every other aspect of this debate, neither side knows how this will pan out but the general view is that there will be less money available going forward rather than more.

The other issue is that national governments may well want additional “public goods” in return for subsidies and these are likely to be in the areas of environmental protection. It is well publicised that the UK Government considers that thus far these benefits to the wider environment have not been delivered and there has been increasing pressure on greening and other ways of achieving environmental benefits in recent years. The whole tone of CAP reform has been a shift towards greater stewardship of the countryside rather than increasing production.

Agri-environment agreements will continue as they are direct contracts with landowners but future agreements may be less generous given the likely budgetary constraints referred to above.

Legislation

The impact of European law on agriculture is mainly through Directives or Regulations.

Directives are implemented via secondary legislation in the form of Acts or Statutory Instruments. These will remain part of our domestic legislation unless amended or repealed.

Regulations are directly applicable in the UK and this, for example, is how CAP reform is implemented. These Regulations will cease to have effect when our membership of the European Union ends. There have also been many statutory instruments passed to implement Regulations as, particularly with agriculture, discretion is left to Member States as to how the Regulations are implemented in each country. Those statutory instruments would also fall away.

So by 2018, a review of domestic legislation will need to be completed. This is a mammoth task and a pragmatic solution may be the wholesale adoption of EU law in the short term. This would then permit a more detailed consideration of what we want to keep or reject thereafter. 

Human Rights

The European Convention on Human Rights is enforced by the European Court of Human Rights in Strasbourg and became part of our domestic legislation following the enactment of the Human Rights Act in 1998. This Act will not be affected by Brexit and protects fundamental human rights such as freedom of speech. However, the EU Charter of Fundamental Rights will no longer apply unless specifically agreed and this covers areas such as working conditions.

Trade

UK agriculture is a major exporter to the EU and if that is to continue, compliance with EU standards will need to be maintained. This will encompass issues such as animal welfare, plant protection, genetically modified organisms and migrant labour.

The debate has been dominated by the issue of immigration and the preference for highly skilled workers qualifying for admission on a points system. However, the agricultural sector has a significant demand for a less specialized workforce such as vegetable pickers and those workers will not find admission so easy. The NFU is calling for an agricultural policy which would continue to give farmers access to the necessary supplies of both seasonal and full-time labour.

Much will depend on the model adopted going forward. If we remain part of the single market then the impact of tariffs on UK produce entering the EU will not be an issue. If we move away from that model then there will be tariff costs associated with exporting to the EU which is a large but declining market for UK farmers. There is a risk that certain food producers will relocate their activities to countries like Ireland, Denmark and, if it remains in the EU, Scotland in order to stay in the single market.

The current volatility of the markets and the fall in the value of sterling will make our exports appear cheaper and so will assist UK farmers exporting produce.

Land Prices

There is huge uncertainty as to how a Brexit will affect land prices. Some agents are anticipating a reduced activity in the sales and letting markets and a subdued level of investment generally. Others are focusing on the fall of sterling and how this will make investment in the UK more attractive to overseas investors.

Summary

Whatever your view of the vote we have now all got to work together to make this a success. Neither side can say with any conviction that the right decision has been made as the outcomes are unknown. What we do know is that there will be initial uncertainty and significant opportunities and threats lie ahead.

For more information please contact Ben Sharples, Partner in the Agriculture team on ben.sharples@michelmores.com or on 0117 906 9303.