5 April 2000
‘Inaction on Pound will destroy farms’
By FWi staff
THE Chancellors refusal to consider weakening the Pound – means farms which could have a long-term future will be driven out of business, claims an NFU economist.
On Wednesday (05 April) Gordon Brown bluntly told business leaders that he was not prepared to reduce the value of the Pound.
Businesses struggling in the export market because of a strong Pound should become more competitive by raising production, Mr Brown told the British Chambers of Commerce.
But NFU economist Peter King said agriculture differs from other sectors.
While the economy has grown at 2.5% for the past four years, agriculture is in its fifth year of recession.
Last weeks 203 million farming aid package announced by Tony Blair included provision for the industry to diversify.
“While the industry accepts that it must restructure in the long-term, the over-valued Pound will cause the closure of businesses which would otherwise have been viable in the long-term,” said Mr King.
Mr King added that while stable interest rates and commodity prices are needed for long-term planning, the UK has experienced a very volatile interest rate climate over the past seven years.
Because agricultural support prices and direct payments are set in Euros, British agriculture is more vulnerable to exchange rates than other sectors of the economy, said Mr King.
The strong Pound makes exports less competitive overseas, and the domestic market is hit because support price is set in Euros.
The strong Pound reduces support prices when converted from Pounds to Euros, which processors pass on to farmers.