What now for the agricultural sector? Post BREXIT debate summary.

Brexit is clearly a hot topic in the agricultural sector and is going to be a catalyst for debate and change in various forms.

Over 40 people attended an event in July at Newmarket Racecourse which was hosted by the CLA, Ashtons Legal Solicitors, Churchgates Accountants, HSBC and Bidwells. Invited industry guests contributed to the discussion about what the agricultural industry wants, and that what our current Government wants is not aligned. The industry needs to respond to Government on this, but as one voice and not piecemeal.

This note summarises those discussions.

In broad terms, it seems that the Government is seeking:

• Value for money in terms of health, education etc.
• Continued food production
• No decline in natural resources
• A vibrant rural economy with growth in employment
• Climate change consideration
• A landscape for the public to enjoy
• Quick wins such as improved broadband.

Meanwhile, UK farmers are looking for:

• Competitive trading and no cheap imports
• Controlled volatility
• Proportionate regulation
• Good but cost-effective labour
• Research, development and innovation to ensure competitiveness
• Tools to do the job such as broadband
• Recognition of their excellent products
• Reduction of reliance on subsidies but needs a balance with ‘level playing field’ of imports undercutting.

Other stakeholders in the debate are the general public. The discussion group identified a need for the sector to engage more widely to improve public awareness of what farmers deliver for their subsidies. This covers a wide spectrum including food, environmental benefits, tourism, the landscape, carbon benefits, flood prevention and other issues.

Key Action Points

Make British Agriculture a USP – promote the quality and reliability of British farmers and their value to the country and its economy.

Define the Agricultural Industry – it is a large sector and needs a long term vision. This should encompass the supply chain, forestry, fisheries and so on in addition to just farmers. A wider range of organisations need to be involved in addition to DEFRA and AIC; for instance The Food and Drink Federation.

Direct Supply – producing what consumers want and marketing to that is one approach to be considered. If subsidies were removed it would lead to massive consolidation and efficiency resulting in large units within the industry with regimented staffing.

Supply Chain – this is a major area of both concern and opportunity. The Government is concerned about the security of the supply chain and ideally farmers need to come together to encourage supply chains to be more streamlined in order to shorten the food chain. Consumers and supermarkets all need to be on board; the Tesco supply chain is a positive example and it is hoped and anticipated that others will follow suit. In particular if prices of the current cheap imports rise, supermarkets may be encouraged to look at food security and consistency of supply from the UK market. Particular areas of concern are the need for more commercial support for cooperatives; the high concentration of input supply, for instance two suppliers have 70% of the red diesel market; and more co-operation is needed within the livestock market. Plus better use of producer groups.

Exports – the export market is vital, with pigs being the most obvious example in East Anglia. The good news is that foreign markets want to buy premium products and are not overly concerned on price and view as more important that food is traceable and safe. A support mechanism is needed in order to break into international markets; the UKTI is really proactive and has a food and drink industry team ready to do business. BIS are part of UKTI, and BIS and DEFRA need to talk. There is a huge opportunity to improve our bio security which in turn will make our products more attractive. The New Zealand model was discussed, with volatile subsidies and R&D marketing their own products. Some felt no subsidies and volatile markets will be the long term result – this could force many smaller farms out of business.

Imports – the key to stopping ourselves from becoming a dumping ground for overseas products is not protectionism but proactivity. We are already a highly respected and trusted food and farming country with a fantastic change to strengthen our bio and food security credentials, develop British Agriculture as a USP and grow our home markets.

Funding/Subsidies – the aspiration is to live without subsidies. Too much red tape and the high costs that go with it will anyhow lead to businesses reaching a point where they decide to go without subsidies. Without them businesses have an opportunity to thrive, and alternative funding methods may kick-start young entrants into the industry. There was discussion around the fact that there are many part-time farmers in Europe. Also up for debate was the purpose of CAP and its historical benefits and pitfalls. The view was that subsidies should be kept for now but be subject to reform once we have exited the EU.

Legislation – the consensus was that Europe won’t give single market free trade without free movement. The perception is that the Law Commission currently proposes to automatically transpose EU regulations to English law and then tweak it. The Norwegian model was discussed and its tariffs.

Stewardship – the view was that we will need to prove land is as good as it was before and improving. We also need to be at the same table as urban based organisations such as Wildlife Trusts and the RSPB. It is for the better and will raise our image with the public in general. Payments would decline whether we were in or out, it just that direct payments will reduce more quickly as we are out.

Business Skills and Strategy Generally – these are important for diversification. It was suggested that we could propose seconding a small team representing the industry to join the DEFRA task force to assist them to develop a strategy for the industry.

Next Generation Succession – we need to make agriculture look attractive to the next generation by being a profitable proposition. Funding is unlikely to be through subsidies but money may be available to kick start young enterprise. The CLA reports a low take up for share farming.

Trust – greater awareness of farmers do and then get trust from the public is important. There are opportunities for self-auditing if there is proportionate regulation and appropriate penalties and enforcement.

Diversification and Marketing to UK Market – the importance of business skills needed to market to and deal directly with the public should not be underestimated and marketing should be a large part of what farmers do. Farming profit is currently split 70% subsidies, 20% diversification, 5% agricultural production and 5% ‘others’. There is disparity in farming profitability with the top 20% of farms twice as productive as the bottom 25%. The perception was that the natural evolution of industry will even out the disparity. There are fledgling ideas re new markets – such as carbon credits – environmental protecting rare breeds and opening up the countryside for NHS wellbeing programmes.

• Resources, climate and landscape – could be monetarised
• Someone pays for your services i.e. field and forestry, carbon sink. Polluters should pay for that … where do these fit?

One Voice – the forum identified the need in the agricultural industry for one working group/task force made up of various lobbying groups. The short term aim is stability.

Labour – there are concerns about the future freedom of movement and likely red tape for foreign nationals wishing to work in UK agriculture. The message has to be that foreign labour is welcome; existing labour and SAWES are vital.

Insurance – the industry needs to understand how this works. The aim is to guard against extremes and AHDB are doing a study.

Volatility – using grain marketers is one way to ease volatility. A particular skill set is required and the price you sell at plays a significant part in profitability.

All of your professional advisers will be happy to talk to you about these issues and the way in which we can help you to protect and develop your business over the coming years. Please contact us:

• Jeanette Dennis at Ashtons Legal – jeanette.dennis@ashtonslegal.co.uk
• Gary Markham at Churchgates – gary.markham@churchgates.co.uk
• Ben Underwood at CLA – ben.underwood@cla.org.uk
• Richard Cook at HSBC – richardcook@hsbc.com
• Jonathan Armitage at Bidwells – jonathan.armitage@bidwells.co.uk