Using farm business income (FBI), Defra’s standard measure of farming sector performance, the report from levy body AHDB and Agra CEAS Consulting, Brexit scenarios: an impact assessment, looks at outcomes for trade, support payments, migrant labour and the regulatory environment across three scenarios — a "business-as-usual" model seeking continuity with current policy, a "unilateral liberalisation" option bringing increased competition from non-EU imports, and a "Fortress UK" model under which UK trade with all other nations is bound only by the WTO’s most favoured nation (MFN) tariff regime.
Unsurprisingly, farming sectors heavily subsidised under the EU’s Common Agricultural Policy (CAP) would see a "dramatic immediate impact of reduced support levels on business profitability", while horticulture, along with pigs and dairy, would be affected much less. Indeed under the third scenario, horticulture’s average FBI, currently put at £33,517, "would be higher than under the second scenario as the protection afforded by MFN tariffs would allow domestic prices to rise, more than offsetting lower Pillar II-type payments", it says.
Meanwhile, as UK horticulture currently exports little to the EU, it would be largely unaffected by tariffs on such exports, which would by contrast lead to downward pressure on domestic farm gate prices in sectors where exports are significant — in particular, cereals, beef and sheep meat. Indeed under the third scenario, these large UK sectors become barely viable at all.
Even under the first, most benign Brexit scenario, with no additional tariff barriers, the report points out: "The costs of imports will rise to reflect the additional expenses of doing business (known as trade friction). Where the UK is a net importer of agricultural and horticultural products, domestic prices would rise in line with the price of imports."
But, of course, the big worry for fresh-produce growers is the effect on labour availability. "In some scenarios higher labour costs, resulting from restrictions on migrant workers, will reduce farm business incomes," it acknowledges. "The significance of this will be highest in horticulture, where labour forms the highest proportion of costs," although "reductions in the cost of regulation mitigate the fall in FBI to a limited extent", it says.
The divergence among the three scenarios is highest in large produce farms, whose higher hired labour costs would push them into negative FBI under the second and third scenarios, according to the report. "Automation of picking and packing operations is clearly one way forward, but there will need to be a wider supply chain view of the future taken."
It concludes that for horticulture: "All three scenarios feature an increase in the value of production output, although FBI only increases under scenario 1 (by 42%), which would appear to be a positive outcome for the horticultural sector."
But noting that "the top 25% of businesses, regardless of sector, remained profitable under every scenario", it urges "taking steps to improve productivity and performance to mitigate potentially negative impacts of Brexit, even before details on agricultural trade or policy emerge".
The AHDB's Phil Bicknell, says: "This analysis underlines the fact that performance matters. As individual farms, we know that we can’t determine policy, but there is plenty that individual businesses can do now to get fit for the future."
NFU EU exit and international trade adviser Lucia Zitti says the report "provides further evidence with regards to the impacts of Brexit on the agriculture sector and the potentially devastating effect that some of our farming sectors could face depending on government policy decisions", but adds: "The three modelled scenarios are intended to contain a number of possibilities from Brexit and should not be seen as predictions."
View from Scotland
NFU Scotland’s Horticulture Committee chairman and Angus Soft Fruits (ASF) grower James Porter last month met UK Migration Advisory Committee chair Professor Alan Manning and Defra secretary Michael Gove to put the sector’s concerns over labour availability post-Brexit.
"For a major soft fruit area like Angus, the importance of seasonal workers cannot be underestimated," he says. "There are only 1,400 long-term unemployed in Angus, yet ASF needs a seasonal workforce of 4,000 to pick crops."
This year the area has already seen a 10-20% shortage of seasonal workers from the EU. "This will get worse year on year," Porter says. "To tackle that, it is essential that we have a UK Seasonal Agricultural Workers Scheme in place for 2018."