Thanks to Brexit uncertainty, which has been around since the referendum in 2016, farmers have gained from the plunge in the value of sterling.
This has helped direct payments in what will be the last year of the conversion from euro to sterling. Beyond next March, in theory, the direct payment mechanism will remain the basis for support, but how it
is implemented will be down to the government. This assumes the government will remain in power and that there will not be a general election. If that happens all bets will be off, including the commitment to phase out rather than end direct payments.
Every day seems to bring more outlandish claims about the implications of a no deal Brexit. While planes will not fall out of the sky, they may not be flying unless an aviation deal can be reached. We have also
had warnings of food, medicine and power shortages. This all seems to be part of a game of bluff being played out with Brussels and indeed with people in the UK. The same sabre rattling is going on in Brussels
and reality lies somewhere between, although it is hard to see where it is at this stage. There can be no question that moving away from 45 years when Brussels shaped all our policies will be a red tape challenge, but it is not impossible if common sense prevails. This is not however guaranteed when politics drive the debate.
What is certain is that a hard Brexit is now more likely than people ever thought possible. The odds are still that a deal will be done, and those will be boosted if Theresa May delivers a good performance at the Conservative party conference next week. That said, farmers and the rest of industry need to be at least considering the implications of a sudden exit from the EU next March. If this happens the government will be under pressure to come up with new rules immediately for a stand alone agriculture. This would be an enormous task, and it would be frustrating if we are out of the EU but end up with the same regulations because the government lacks the drive to put a UK model in place quickly.
These are all challenges that could be got around, but where we would be walking off a cliff is when it comes to the market. We would literally be left with no way to access the EU-27, and no trade deals in place with the rest of the world. This really would be uncharted waters, and they are waters full of unexpected sharp rocks. Look at any supermarket shelf and it is clear the UK is dependent on food imports. These account for around 40 per cent, and that is not only of products we cannot produce. Irish cheese and beef, Danish bacon, Dutch and German meat and Italian cheese and pasta – the list is long and if supplies are halted by tariffs it is not simply a case of UK producers taking up the slack. The food market is complex and EU -27 suppliers are very good at what they do. In theory World Trade Organisation tariffs would apply, but as an EU member state now the UK is not even a member of the WTO.
This is of course a double edged sword, in that the EU 27 sells more food to the UK than it exports to them. There is a lot of brinkmanship in Brussels, but the European Commission and EU 27 heads of state know full well that they need a deal with the UK. It is one of their biggest markets. More importantly it is a more profitable market than many overseas, and that applies as much to BMWs as it does to bacon. While it has not mentioned food shortages with a hard Brexit, the government is well aware of potential problems. The UK cannot survive without food imports. This will remain the case, whether food comes from the EU-27, Asia, South America or New Zealand and Australia. This is why there are rumours the government wants to scrap EU rules on food standards.
Crucially, the United States wants this as part of a trade deal. This would reduce rather than increase the price of food, since the countries supplying the UK would be lower cost producers than the EU-27. So, far from boosting prices for farmers, a hard Brexit could have the opposite impact.