The agricultural industry is in the frontline in terms of the potential impact of Brexit. There are three key policy areas that will dictate the impact and shape the future of the sector:
Replacement of the Common Agricultural Policy (CAP)
In 2015, the UK received approx. £2.4 bn in direct EU support and in many cases the farm businesses concerned would not be profitable without it. The UK Government has committed to maintaining the current level of direct payments until 2020 but after that the future is uncertain. Some Brexit supporters have noted that maintaining the current level of subsidy will cost UK taxpayers less, as we currently get back less than we put into the EU budget. However, concerns have been raised that any new system (whether administered through Westminster or devolved to Scotland) will choose not to subsidise farming on the same scale as the EU, with agriculture having to compete against other areas of spending at a time of great pressure on public finances. Some see this as a welcome opportunity to reform agricultural policy, perhaps because they would like to see a move away from direct subsidies towards a more free market approach, or would wish to see support shifted from farming towards environmental concerns.
New Trading Arrangements
UK farmers currently have barrier-and-tariff-free access to the EU single market, with over half of the UK's exported food goods going to the EU. On the other hand, the UK imports nearly twice as many agrifood products from EU countries as it exports. There are a number of models that the UK Government could follow, including a free trade agreement with the EU, trading globally under general World Trade Organisation rules and trade liberalisation, each of which would have different impacts on different parts of the industry. The net effect of this on farmers' margins will be linked to the post 2020 subsidy level. Whether we retain links with the single market or leave it, the industry will want to see that agriculture is not sacrificed when trade deals (with the EU or with other countries) are being negotiated.
Free Movement of Labour
Some parts of the agricultural sector are heavily dependent upon the free movement of workers between the EU and the UK. It is possible that any trade deal with the EU that retained large elements of our current single market access would come with 'strings attached', including free movement of workers, but this might not be politically acceptable to the UK. If free movement is restricted, the former Seasonal Agricultural Workers Scheme could be revived. This allowed nationals from a variety of non-EU countries to live in the UK under certain circumstances. However, it is not clear how longer-term workers will be treated, as a points-based system appears to have been ruled out.
There is much debate to be had on the future operating structure of the industry. Brodies has been considering and advising clients on the raft of legal, political and commercial issues relating to Brexit, particularly those specific to Scotland. With Scotland's leading EU and constitutional law team, we are uniquely placed to help clients in the private, public and third sectors understand and address the many questions to which Brexit gives rise.
