How Could Brexit Affect My Farm – Article by Ben Mitchell, Commercial Property Solicitor
With the United Kingdom set to leave the European Union on 29 March 2019, time is running out for the Government to come to an agreement with the EU as to the terms on which the UK is to leave.
The intention is for the UK to enter into a Withdrawal Agreement with the EU. This is currently being negotiated and contains provisions for a ‘transitional period’ that would see things continue broadly as they are until 31 December 2020. However, if a ‘no deal’ situation transpires, the UK will crash out of the EU with no transitional period. This would lead to mass uncertainty around various matters, such as trade and immigration. This could have serious consequences for UK businesses. These notes focus on the potential impact of Brexit on farms.
Levels of financial support
With 50–60% of farm income in the UK currently attributed to EU farm subsidies, uncertainty as to the level of support to be provided to farmers post-Brexit is likely to be one of the most significant challenges facing the industry. As it is not clear exactly how the level of support for agriculture is to change, and when, it is very difficult for farmers to prepare.
The Government is in the process of publishing a number of guidance notices advising individuals and businesses on how they can prepare for a potential ‘no deal’ Brexit. These can be found online here. 25 guidance notices have been published so far, but more are to follow in September. Two of these notices deal specifically with farming.
The first notice deals with farm payments and confirms that funding levels will be unaffected until the end of 2020. It also states that the Government has pledged to “continue the same cash total in funds for farm support until the end of this parliament, expected in 2022”. It is not clear whether the proportion paid to each individual farm will be the same – the notice merely confirms that the total amount paid by the Government will match that currently paid by the EU.
The second notice discusses the receipt of rural development funding. The Government has guaranteed that projects for which funding is agreed before the end of 2020 will be funded for their full lifetime. It is therefore imperative that farmers wishing to seek funding take steps at an early stage to ensure that this deadline is met.
The current indication is that after 2020 the Basic Payment Scheme will remain, but there may be a cap on payments for larger farms. The introduction of a replacement scheme is likely to commence between 2021 and 2024 and the level of direct support will be reduced until 2025, when direct support will end. Current indications from the Government appear to be that the replacement scheme will provide subsidies based on the extent to which farmers take steps to improve the environment and potentially also whether they make their land accessible to the general public. The specifics of any replacement policy are yet to be disclosed.
Trade and exports
The impact of Brexit on trade and exports will mainly depend on whether a deal is struck with the EU. Whilst a trade deal cannot be agreed with the EU before March 2019, if a Withdrawal Agreement can be reached and a transitional period established, this would at least provide some time during which a trade agreement could be reached. There are doubts, though, as to whether even this would leave enough time for full agreement to be reached with the EU.
It is possible that the UK will exit the EU or come out of the transitional period without a free trade deal, meaning that trading with EU countries would become more cumbersome and expensive. Even if there is a trade deal, it is probable that exports will be more expensive than they are currently as the UK is unlikely to be offered terms identical to those it currently enjoys by virtue of its EU membership.
Another aspect to consider is trade to non-EU countries post-Brexit. As a member of the EU, the UK enjoys trade agreements with over 60 non-EU countries. It is not yet certain whether the UK will need to re-negotiate those trade deals once it has left the EU or whether it can simply agree with those countries to continue under the terms of the current agreement. Businesses that export produce to or import from such countries should monitor this situation closely.
Farm workers from the EU
It has already been reported that farms are struggling to obtain the necessary labour, and this is before the UK has even left the EU. This is particularly the case for growers who rely on workers to harvest food crops – there have been stories in the press describing food crops left rotting in fields as farmers have not been able to employ sufficient workers for their needs.
Given the struggle that farms are already experiencing with staff recruitment, which is only going to become more difficult once the UK leaves the EU, it is essential that employers ensure that their current EU staff have the right to continue to work in the UK.
This article from Alexis Hager provides further information on how EU citizens’ rights to live and work in the UK can be protected post-Brexit and on how Parnalls can help with this.
On 6 September 2018, the Government announced a post-Brexit migrant farm worker visa scheme which confirmed that growers will be able to recruit migrants from outside the EU as seasonal workers during a transition period after the UK leaves the EU. It is hoped that the six-month visas available for up to 2,500 workers per year will help to cover the anticipated shortfall of workers that it is feared will occur after Brexit. Whilst 2,500 is a very small number of visas and is unlikely to fully cover any actual shortfall, this is only a pilot scheme and numbers may increase if it proves to be beneficial.
What can farmers do to prepare for Brexit?
The Agriculture & Horticulture Development Board (AHDB) has rolled out an online ‘Brexit Impact Calculator’, allowing farmers and growers to input their own data and see what effects the different Brexit scenarios may have on their business.
Given the uncertainty surrounding the future of the industry, farmers should prepare contingency plans in the event that they are rendered unable to continue with their businesses. If farmers rent their farms, they should try and ensure that their Farm Business Tenancies contain sufficient break clauses to enable the farmer to exit the tenancy early. Farmers can also increase protection by inserting clauses into commercial agreements that would enable them to exit contracts in the event of Brexit causing a significant disturbance to their business. Consulting a solicitor will enable farmers to ensure that such clauses are drafted correctly.
Brexit may provide a suitable opportunity for farmers to diversify. Given the uncertainty in relation to the agriculture industry, farmers (particularly those with farms in popular tourist areas) should consider the possibility of carrying out development to convert farm buildings into holiday homes, for example. This would allow farmers to obtain a second source of income in the event that their farm business is adversely impacted by Brexit. The recent weakening of the pound is likely to increase the number of tourists visiting the West Country; it is likely to discourage some families in the UK from holidaying abroad and is also likely to be attractive to tourists from overseas.
Otherwise, farmers should continue to monitor developments. The next important development to look out for is the forthcoming Agriculture Bill 2018, which will set out in further detail the Government’s plans for agriculture post-Brexit and is due for publication this Autumn.
These notes are intended for information purposes. It is not a full statement of the law and should not be relied on as specific legal advice.