EU exit perspectives: Five ways farming will change in 2021

The UK’s exit from the European Union is now imminent and new rules on trade, business and travel will be coming into effect on 1 January 2021. AHDB’s chief strategy officer, Will Jackson, urges farmers and growers to consider five key areas and take action now to prepare for the changes ahead.

The most important question for those in the agricultural sector is undoubtedly, ‘How will these changes affect my business?’. To gain a better understanding, here’s a breakdown of five key areas of interest for farmers and growers, linked to actions they can take now.

Policy

An agricultural transition period will be in place in England from the start of the year to help farmers plan for the new arrangements that are on the way, with or without an EU/UK free trade agreement (FTA). The standout element of this is the seven-year phased reduction in direct payments. These payments offer a level of security and certainty to farm business income, amounting to 61% of profitability across the board, though it differs by sector.  

We have plugged all the latest government information into our Business Impact Calculator so farm businesses can get an idea of where they stand to inform decision-making.

We’ve also produced some summary analysis of agricultural policy for Scotland and Wales to help those in the devolved nations plan.

Markets and commodities

We expect trading under both UK import tariffs and EU tariffs to result in price changes for UK farmers. There will also be new checks at our border points which need to be accounted for if your farm business, or your buyer, is involved in exporting or importing goods and services.

If the UK and the European Union fail to agree on a trade deal, we can expect some new complexities and restrictions as a result of fresh tariff and trading regulations. Alongside this, the UK/EU relationship would continue on World Trade Organization (WTO) terms indefinitely, bringing its own uncertainties.

The agriculture sector also needs to be conscious of new free trade agreements. We know that FTAs with USA, Australia and New Zealand are in the pipeline. All are big agricultural exporters and conclusion of trade deals will have implications for UK agriculture. Keep an eye on our website for the latest market prices and information on tariff changes if the UK/EU future relationship is to be based on WTO terms.

Inputs and suppliers

As of 1 January 2021, the UK‘s position on transporting goods to and from the EU switches from ‘deliverer’ to ‘importer or exporter’. As a result, we face the possibility of delays at ports and additional border checks.

Trade friction, or the costs associated with additional paperwork, customs checks and portside delays, will affect trade both ways. This may be passed along the supply chain and farm businesses need to talk to their suppliers about any possible disruptions.

The scope of inputs we need as an industry is wide-ranging and involves both the EU and third countries. Read more

Farm finances

We aren’t yet sure on the type of impact new trading and tariff-based regulations will have, so it wouldn’t be right for us to speculate. However, it has never been more important to understand the financial position of your business. Whether the UK moves forward with a trade deal with the EU, or we work with our current trading partners under WTO terms, the market will be unpredictable, and perhaps volatile, as it adjusts.

We have a range of tools to help including budgets and forecasting, managing cash flow, cost of production and our KPI calculator.

Labour

Labour complications need to be considered by each farm business. It’s likely there will be a smaller pool of people with the required skill set available and competition will increase.

Find seasonal labour, access a ‘new employee checklist’ and get pointers for training your team for business success by visiting our website.

Looking ahead

More so than usual, in our line of business, the New Year is unlikely to be a break, but I hope you all get a chance to raise a glass and reflect upon how resilient we have been against all that 2020 has thrown at us and embrace the year to come.

Most importantly, if you are struggling in any way at all, there are brilliant people here to help. It’s always worth talking rather than struggling on alone.

Wishing everybody a happy New Year and hoping it’s much more straightforward than 2020.