Shell-shocked. That’s probably the right word describing Europe these days. A small majority (52 per cent over 48 per cent) of UK has voted to leave the European Union. It will take several years to work out the administrative and regulatory part of the divorce, but already now the impact is felt. The British Pound has rapidly started to lose its value, several high political figures have resigned and companies and banks are making announcements about their plans to relocate their headquarters to another country in the EU.
The vote showed a strong divide in age and region. Of the 18 to 24year olds, 64 per cent voted in favour of staying within the EU. Whereas, of the 65+ category, 58 per cent voted for leaving the EU. The first category will have on average 69 years to live with this historic vote (that they did not want), whereas the older generation, only has on average 16 more years to deal with this decision and its impact.
In the preparatory phase, the Leave camp and the Remain camp were throwing strong statements over the fence on the perceived benefits and disasters of leaving the EU, including on agriculture. In order to understand better the impact of the Brexit, it is important to understand more about the EU’s Common Agricultural Policy (CAP). This policy is a cornerstone of the EU, taking a 40 per cent slice out of its v58 billion annual budget. This CAP was set up in 1957 and currently provides financial support to some 12 million farmers across Europe, boosting agricultural productivity, with the final aim to ensure the EU’s food supplies.
The CAP structure has evolved overtime. The original scheme effectively boosted market prices, leading to over-production. Who doesn’t remember the (in)famous butter mountains and milk and wine lakes of the 1980s. In response, the EU introduced quotas on everything from milk to sugar beets, which are only now starting to be lifted, and by changing the system to make direct payments to farmers. These direct payments were changed again in the mid-2000s to reward farmers for particular land use, and in 2013 new green incentives were introduced for adopting measures such as tending to wild grassland.
The CAP scheme has two main pillars: direct payments, known as the basic payment scheme (BPS), and funding for the wider rural economy. In 2015, UK farmers received almost €3.1 billion (£2.4bn) in direct payments, according to the National Farmers Union (NFU) in the UK. The UK farmers have access to the €5.2bn (£4bn) pot of funding that has been allocated for rural development projects over the period 2014 to 2020, including €2.3bn that has been transferred from the BPS to the UK rural development programmes. In total, 55 per cent of UK total income from farming comes from CAP support.
So to estimate the impact of Britain leaving the EU all depends on what – if anything – would replace CAP. It seems ‘Mission Impossible’ to try and measure the impact of the UK being outside the EU since it is not known what kind of relationship the UK would have with the EU nor the conditions under which UK farmers would be expected to operate.
CAP subsidies form a significant part of most farm incomes, and many organisations predict that the UK government would be unlikely to match the current levels of subsidy. So it seems fair to say the leaving the EU regime would probably reduce income for UK farmers. The NFU in the UK has been very critical about Britain leaving the EU, arguing that by removing the CAP support, while it remains in place in the rest of Europe, will devastate British farming. Consultancy firms have calculated that land prices would crash and 90 per cent of farmers could go out of business. Some advocates of Brexit on the other hand, for example UK farming Minister George Eustice, have insisted that Britain could opt to continue providing subsidies. But many are certain that no UK government would subsidise agriculture on the scale operated under the CAP.
Also the scientific community is gobsmacked by the voting results. Scientist in the UK depend heavily on EU membership for research funding, collaboration and recruitment of top talent. The UK’s access to Europe’s large pool of research funding is now at stake. Nobel Prize winning physicist Peter Higgs, discoverer of the Higgs boson, described the Brexit as a ‘disaster’ for British science.
Apart from agriculture and science, there will also be an impact on UK environment. EU regulations have done their fair share to improve the environment in the UK. Britain’s seas are far cleaner now than they were in the last few decades thanks to the EU’s push to tackle water and air pollution. Currently only 4.9 per cent of UK bathing sites had “poor” water quality. And similar directives have addressed poor air quality, endangered species and strict guidelines on potentially dangerous chemicals which all have proven to be successful. The EU’s aim for 20 per cent of energy to come from renewables by 2020 has also been credited for the rapid growth in the UK renewable energy industry. The UK has a history of resisting and watering down EU environmental guidelines and environmentalists argue that a Brexit would almost certainly be bad for the UK and global environment.
So the question remains, apart from a stronger farming sector, a scientific powerhouse, higher water and air quality, better protection of endangered species, stricter guidelines on the use of potentially dangerous chemicals, a boost to UK industry and increased food security, what did the EU ever do for the UK?
Overseeing all of this, it is hard to see that the exit from the EU will be beneficial to the UK farming sector, or to the UK food and drink industry more generally.