Agriculture

There is currently limited economic data on what the impact of the vote to leave has, meant for the industry, but there have been signs of some impacts in the sectors it is closely linked to - namely retail where investment intentions are somewhat weak [1] and food and drink manufacturing where price increases are anticipated [2] . The industry is also heavily involved in both energy production and consumption. It relies on the chemicals industry for pesticides, the pharmaceutical industry for animal health and innovative manufacturing companies to help increase crop yield.

Key stats

  • 476,000 employees
  • £8.5 billion GVA (0.7% of total GVA)
  • £18 billion exports
  • £38.5 billion imports
EU Trade: It will be important to avoid prohibitively high tariffs on trade in agricultural products

As 72% of agricultural exports are to the EU [3] , agricultural businesses want UK-EU trade to take place on a preferential basis free of tariffs. The EU's importance to the sector as an export destination is likely to remain high, as perishable goods - such as milk and fresh produce - do not travel long distances well, despite innovations. The UK's agricultural businesses could therefore be put at a real long-term competitive disadvantage if their products become subject to tariffs in their largest market - with an average tariff on dairy products of 36%, animal products 20%, fruit and vegetables 10% [4] . Different types of farming will be affected by exit in different ways depending on the UK's future trading relationship with the EU because of this range of tariffs differing between industries [5] .

The agricultural industries in the UK and the Republic of Ireland are also tightly integrated. Large amounts of the Republic of Ireland's agricultural products are sold in the UK, and there is a highly interdependent supply chain on the island of Ireland. For example, a quarter of the North's milk pool is processed in factories located in the South [6] .

Regulation: New domestic systems of regulation must still allow simple access to the EU for agricultural products

The agricultural sector widely holds the opinion that leaving the EU provides an opportunity for a completely new domestic approach to farming in the UK. The quality, grading, weight, sizing, packaging, wrapping, storage, transport, presentation, origin and labelling of agricultural products is currently regulated by the EU, and businesses in the sector also have a keen interest in environmental rules too. However, there is a challenge to balance this new approach with one that will still ensure favourable access for UK agricultural goods to the EU market.

Migration: The agriculture sector employs many EU workers in full-time and seasonal roles

Any new immigration system in the UK must take into account that 65% of the 34,000+ non UK-born workers employed in agriculture are EU migrants [7] . These workers do both full- time jobs in year-round industries like dairy and farming, and are employed for seasonal work, for example in horticulture [8] .

International: New international trade opportunities must consider the needs of domestic producers

There is a real opportunity for the UK's agricultural sector to expand its exports across the world with a revived trade agenda. However, the UK government will have to take care to balance access to UK markets with the needs of domestic producers.

Funding: Leaving the EU is an opportunity for a new funding deal for the rural economy

While agricultural business owners would generally rather not rely on subsidies to be viable, the way the global market works has rendered this necessary. Outside the EU, a new funding deal for agriculture must be agreed. An average of 55% of the total income from farming currently comes from CAP support payments [9] .

Exit: A smooth exit is needed to ensure continued trade in agricultural goods

If the UK leaves the EU without a deal, international law will oblige the EU to implement tariffs on the UK's agricultural products. UK goods would also be subject to EU quota rules, with effective upper limits on volumes. Many companies are likely to find these prohibitive to trade. This would be a very difficult situation for Northern Ireland in particular. There would be considerable regulatory confusion and complication. This situation must be avoided, through interim arrangements if necessary.

Our members say

"If the UK left the single market and customs union, moving to WTO terms of trade with the EU, tariffs on grains and flour sold to the EU would be over 50%, which would hugely disrupt our competitiveness in a global market." - flour milling organisation

"We have all the same legislation and labels when we sell with EU countries. US cheese has to be labelled separately in pounds and ounces, and little changes like that can add a lot of complication and cost." - medium-sized Somerset dairy farmer and cheese manufacturer

"There's a massive short-term labour need during the Christmas turkey season which we couldn't fulfil from the UK labour market alone, but there is an all-year round need." - medium-sized poultry farm
Our partners have more information:
  • Country Land & Business Association
  • National Association of British & Irish Millers
  • National Farmers Union

For agriculture at the CBI, contact: John Stevens on 0207 395 8218 or John.Stevens@cbi.org.uk


References

[1] CBI, November 2016 Distributive Trades Survey

[2] CBI, November 2016 Industrial Trends Survey

[3] FDF, UK food and drink export statistics for 2015

[4] WTO, EU MFN Tariff Rates

[5] Wagenigenur, Implications of a UK exit from the EU for British agriculture

[6] NIFDA, Brexit: Challenges and Opportunities for Northern Ireland Food & Drink

[7] ONS data provided to the NFU

[8] NFU, Farming's Offer to Britain

[9] National Statistics, Total income from farming in the UK

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