Farm incomes for vegetable and potato businesses are set to fall after Brexit regardless of what withdrawal deal is finally agreed.
That’s the conclusion of a sobering new impact assessment by AHDB, which has painted a bleak picture for the short-term future of British farming following the UK’s eventual exit from the EU. It outlines a cocktail of rising prices and spiralling labour and machinery costs combining to push down the profitability of farms in this country.
The analysis models impacts on farm business income (FBI) based on two Brexit scenarios: the UK achieving a free-trade agreement (FTA) with the EU, and the UK reverting to World Trade Organization (WTO) tariffs upon departure. It then explores the impact of these on a range of farm businesses, including carrots and potatoes.
For carrot growers, income falls to £1,300/ha under the FTA model, and to £1,445/ha on WTO tariffs, both of which represent a significant drop on the current level of just over £1,600/ha. Explaining the drop, the study chiefly blames an increase in labour costs of £486/ha, with labour making up a higher portion of the cost of production in vegetables than other farm types. An increase in returns from carrot sales of £148/ha in the FTA scenario and £298/ha under WTO terms is not enough to compensate.
“In terms of trade, the UK is a net importer and production revenues rise due to rising carrot prices in both scenarios,” the report explains. “This is caused by trade friction on imports, with a zero per cent tariff under the WTO:UK tariffs scenario.”
For potatoes, income is expected to fall to £917/ha under the FTA scenario and £1,030 under the WTO alternative, down from a current level of around £1,350. Again, labour cost increases of £542/ha explain the majority of the decline, alongside an £18/ha fall from reduced direct payments.
On the domestic market, carrot prices are expected to rise by 1.2 per cent under the FTA model and 2.4 per cent under the WTO model by 2022. Potato prices are predicted to go up by 1.8 and 3.6 per cent respectively.
While the drop in incomes is concerning, horticultural producers get off relatively lightly compared to some of their agricultural counterparts, with profitability turning to losses in the case of sectors such as poultry.
NFU president Minette Batters said the AHDB report underlines just how significant future government bills on trade, agricultural policy and immigration are on the country’s food producers.
“It is vital the British government recognises farming and food production as a strategically important industry for the nation and works towards an outcome that will ensure farm businesses are in a position to continue supplying the nation with safe, traceable and affordable British food,” she said. “Across all farming sectors and a number of enterprises, the AHDB’s results show a significant decline in farm business income under both scenarios modelled, predominantly as a result of increased costs of labour and pressure on farmgate prices. It is no exaggeration that entire enterprises, for example poultry production, could be unviable if the assumptions in the model were correct and ever realised.
“The NFU has long advocated maintaining free and frictionless trade with the UK’s largest export market for agri-food products – the EU. For many sectors, accessing the EU market is absolutely critical for achieving balance on the domestic market. The prospect of increased costs for our exports, coupled with the significantly more trade-liberal approach announced by the UK government for imports into our country, will leave many farmers worse off.”
