It’s like “Groundhog Day” – with less than two months to 29th March, we keep going round and round in circles on the subject of the Northern Ireland border and, without resolution to this thorny subject, the prospect of a “No Deal Brexit” comes ever closer.
However, what will this really mean for our farmers? Well, as ever, the answer does not seem to be that straightforward. If we look at the beef and sheep sectors, which are often thought to be the agricultural sectors which will be most badly affected, the Agricultural and Horticultural Development Board (AHDB) have just published a booklet entitled “Brexit prospects for UK beef and sheep meat trade”.
In very simple terms, my understanding of this is that, on leaving the EU without a deal, we will start trading with the EU under World Trade Organisation (WTO) terms which will mean that the EU will impose tariffs on the UK as if we were a third country outside the EU with whom they have no particular trade agreements.
The range of tariffs imposed varies widely for different products, but the basic principle for beef and sheep are that there is a basic tariff of 12.8% charged on imports into the EU, plus a flat rate cash sum which is added to the above tariff. The cash sum from beef varies from €1,414 to €3,041 per tonne depending on the product and similarly it varies for sheep from €902 to €3,118 per tonne.
But what does this mean in real terms? Well, for beef based on 2017 figures, these tariffs would have equated to a tariff of between 61% and 113% depending on the product concerned and for sheep from 37% to 45%.
In addition to these financial barriers, the EU would then impose non-tariff barriers relating to food quality which will add from around 5 to 15% to the cost of exporting to the EU.
Tariffs and trade barriers of this scale will obviously have a massive impact on the competitiveness of our beef and sheep products being exported in to the EU, but this story is not quite that simple. One also needs to understand our existing trading arrangements and what our government’s attitude will be towards imports.
As far as beef is concerned, we import more than we export and we are not self-sufficient. Therefore, in theory, if the government decided to impose similar tariffs on imports, there would be increased demand for beef and domestic beef prices could rise. But, would the government tolerate the inevitable inflationary effect on food prices? If not, they could reduce tariffs and relax food standards on imports, thereby attracting cheap beef from countries like Brazil which would have a damaging effect on domestic beef prices for farmers.
Unfortunately for sheep farmers, there seems little prospect of any upside to a no deal Brexit. Around 90% of lamb exports go to the EU and, with tariffs approaching 50%, this would be a blow to our price competitiveness, which would be further exacerbated by fierce competition from New Zealand and Australia, which have free trade deals with the EU and elsewhere around the world. As a result, it is thought that sheep prices could fall sharply in the UK reducing sheep farmers’ incomes considerably.
Thus, it seems a no deal Brexit could have serious consequences for many livestock farmers.
For further information, please contact James Stephen from the Carter Jonas Rural team.