Farm profits to sink after Brexit under a no-deal scenario
A no-deal Brexit is going to impact hard the beef and lamb sectors in the UK, according to a study conducted by The Andersons Centre. The study commissioned by levy bodies AHDB, Quality Meat Scotland (QMS) and Hybu Cig Cymru – Meat Promotion Wales (HCC) explores in detail the impact of tariff and non-tariff measures (NTMs) in both deal and no deal scenarios on beef and sheepmeat trade.
In fact, the impact it could be so hard that exports to the EU may drop by 92% as John Richards, Industry Development Manager at HCC observes.
"This analysis suggests that the impact of a No-deal Brexit in October would be deeply felt by sheep and beef farmers in Wales. This research has shown that exports to Europe, which is currently the destination of over nine-tenths of our overseas trade, could fall by around 92%.
The report estimates that this would lead to a 24% fall in prices for lamb, at the time of year when thousands of lambs are coming onto the market every day. This would have a major impact on farm incomes," he said. In fact, even if a deal is reached by October 29 farmers are going to take the hit of the UK"s departure.
"Trade impact under a Brexit deal scenario is relatively small for both beef and sheepmeat, although slight decreases in exports (1.1%) are expected due to non-tariff measures adding inefficiencies to just-in-time supply chains. At farm-level, Andersons’ Meadow Farm model sees profitability fall from £93 per hectare to £68 per hectare in a deal scenario and -£45 per hectare in the event of no deal," shows the study.
A no-deal Brexit would cause significant upheaval for both beef and sheepmeat trade, with exports to the EU falling substantially. Some trade with the EU would continue for beef, with the EU’s Tariff Rate Quota (TRQ) allowing market access. A new UK TRQ for beef imports would be open to all countries, causing a dramatic rise in non-EU imports, lowering prices and driving up domestic consumption by 7%. The domestic consumption of sheepmeat is expected to rise by 14% due to lowering prices. The overall impact on the value of domestically produced meat is expected to be -4% for beef and -31% for sheepmeat.
Also, frictionless trade with the EU27 as a third country is not currently possible and the development and implementation of the required technology could take a decade. Value deterioration, especially for fresh meat, arising from border-related delays due to physical checks and sampling accounted for more than 60% of NTM costs on checked loads. Smaller businesses are likely to be disproportionately impacted by NTMs, due to the regulatory burden and the cost of more checks over fewer loads.