Scots face tough times post Brexit, warns AHDB

Levy bodies have warned Scottish farmers to review their businesses and prepare now for Brexit after a report forecast huge differences in fortunes across the sectors once Britain leaves the EU.

The Horizon report, produced jointly by the AHDB, Quality Meat Scotland and SRUC, considered several post-Brexit scenarios for the major sectors north of the border, as follows:

  1. Evolution – farm payments, labour supply and trade agreements remain similar.
  2. Liberalisation – direct payments removed, Pillar 2 payments increase to 50% of current overall support, regular labour costs increase by 50%, no EU/UK trade deal.
  3. Fortress UK – Direct payments removed and Pillar 2 payments cut to 25% of current overall support, 50% increase in all labour cost, no EU/UK trade deal.

See also: Farm incomes could halve under bad Brexit deal, warns AHDB

Under all three scenarios, the report suggests the pig industry could fare well, with a baseline annual income forecast to increase from the current £46,067 to as much as £205,354 under the third scenario.

In stark contrast, specialist sheep incomes fall under all three scenarios from their existing level of £11,122 to as low as -£12,379 – a drop of -210%. Likewise, cereals decline in all cases.

Other sectors face a more mixed outcomes. Dairy incomes would increase from £35,442 to £53,888 in scenario one, but fall dramatically to £4,375 in the second scenario and rise by 37% to £48,640 if scenario three became a reality.

And annual incomes on specialist cattle farms would rise from £24,641 to £28,028 under scenario 1, but fall dramatically under the other two scenarios.

Hypothetical

Speaking after the report was launched at AgriScot 2017 on 15 November, AHDB chief strategy officer Tom Hind stressed the outcomes were hypothetical.

Furthermore, most of Scotland’s trade was conducted within the UK, making it less exposed to Brexit’s impact than England.

For sectors such as dairy and pigs, import substitution, export opportunities and lower dependence on farm support payments could result in the improved profits under the scenarios, he suggested.

But those sectors that were more exposed and with limited scope to target new outlets, such as cereals and sheep, were more likely to find trading conditions tougher.

“Looking at all of the scenarios we have found that businesses that have a better cost control and knowledge of target markets are the most likely to remain in profit.

“It is vital for all businesses to carry out a thorough review now and look at costs and profit over a five-year rolling period. Businesses that do so will have a much greater chance of making a profit, whatever changes finally materialise.”

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