Business Income for Cereals to Fall 19% in case of Hard Brexit

AHDB’s latest impact assessment of Brexit scenarios models a fall in average farm profits from around GBP42,750 a year to GBP26,285 in 2022 in the case of a hard Brexit. This will also affect cereals.

For cereals, baseline farm business income falls 19% from GBP48,902 to just over GBP39,000 in the UK-EU FTA scenario, in 2022. Under the World Trade Organisation (WTO): UK tariffs, it falls by 29% to just under GBP35,000. The cereals sector is particularly susceptible to the removal of direct payments in this scenario causing a negative income. Increased labor costs are a significant cause of the falls in both scenarios, with inputs costs also rising in the event of WTO: UK tariffs. A decline in revenues from barley, due to market access to the EU being closed off by high tariffs, also contributes.

With continued uncertainty over the UK’s future relationship with the EU, AHDB is urging farmers, growers and food businesses to come and talk to their advisers about the steps they can take to help their businesses survive and prosper regardless of what the politicians throw at them. AHDB has a wide range of support tools and resources to help farmers prepare for the inevitable change that will come.

AHDB chief strategy officer Tom Hind said: “Amid the current uncertainty around a deal or no deal, a wait-and-see approach might seem logical for most farmers. But change as a result of Brexit is a certainty and whether it takes place over three or eight years, it will come. “Our modeling may make for sober reading. It’s important though to recognize that these are projections, not predictions. Our industry is dynamic and responsive to change. Deal or no deal, AHDB stands ready to help farmers navigate a successful path through Brexit.”

The website provides a one-stop shop for relevant government advice on no-deal planning. The Brexit impact calculator enables businesses to look at how they might fare under different scenarios.

The analyst from AHDB says that while there is little the industry can do to control Brexit negotiations, the key factors that mark out top performers are in their control: knowing your market, knowing your costs, how you compare, paying attention to detail and so on.

The study, commissioned by AHDB and conducted by Agribusiness Intelligence, models the impact by 2022 of two new scenarios on farming incomes, taking into account changes to policy, labor, and trade, including the temporary tariff regime announced by Government in March.

The first, UK-EU FTA, assumes a free trade deal has been agreed, while the second, WTO: UK tariffs, assumes UK produce will face EU Most Favored Nation tariffs while imposing its own tariff regime on imports.

While an FTA with the EU provides for more stable conditions post Brexit, higher labor costs, trade friction and changes to the policy in England will nonetheless start to have a negative impact on farm incomes under both scenarios. The analysis also highlights the dependency on some sectors of CAP direct payments, which are set to disappear over the medium term as a result of policy changes in England.

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