NFU Brexit Report Summary

Were the UK to leave the EU it has to redefine its trade relationship with the EU and it has to decide what agricultural policy it wishes to pursue. The report commissioned from Wageningen University by the NFU investigates the trade and farm income effects of the three possible trading arrangements that might follow Brexit:

1) a UK-EU Free Trade Arrangement (FTA)
a WTO default position
a UK Trade Liberalisation (TL) scenario

“In each of these scenarios the effects of three different levels of agricultural support are estimated: status quo, i.e. a continuation of all direct payments, 50% reduction of direct payments and no direct payments (see Table ES.1). It is assumed there is no change in the level of environmental (Pillar II) payments to farmers.”

“The UK currently contributes an estimated €7.9bn to the CAP budget, from which its farmers receive €3.8bn. A Brexit would save the UK budget expenditure on agriculture: the declines in budget expenditure vary from €4.1bn (-52%) to €7.3bn (-93%), depending on whether the UK’s new agricultural policy will maintain 100% direct income payment, reduces payments by 50% or abolishes them.”

Based on maintaining the current level of farm payments the report concludes that:

“Price changes due to a Brexit have a positive impact on farm incomes in all sectors under the FTA and WTO-default scenario.”
“In case of a UK Trade Liberalisation scenario, the livestock sector will face price declines, and subsequently its income is negatively affected.” The impact on farm incomes is positive for field crops.

Not surprisingly, the authors discover that lowering direct payments decreases profitability:

“In case of the abolition of direct payments a large share of farms will have negative income effects. Consequently, the viability of a substantial share (15-25%, depending on the scenario) of farms will be negatively affected by this policy change. Livestock sectors in particular are heavily dependent on direct income payments… Overall, two-third of the UK’s farm income relies on direct payment support.”