Will you succeed after Brexit?

Our relationship with the EU has entered a new phase. The signing of Article 50 seemed to signal the end of the “phoney war” and we now seem to be busy sparring, with both sides throwing out extreme demands as positions are established prior to the real negotiations taking place.

We know little at this stage, but we do know that the Article 50 process is irreversible and will conclude in two years time, although this period can be extended with the unanimous agreement of all 27 remaining Member States, which somehow seems unlikely. Some “Remainers” don’t seem to have given up on the hope of the UK staying within the EU. They may have a cause as it is hardly unusual for the EU to ignore its own rules to achieve its political objectives, but Mrs May seems steadfast in her resolve.

So what is in store for agriculture post 2019? We do know that the existing support payments will remain until 2020 and that multi-annual schemes should be honoured if they extend beyond that date. Other than that, we know very little as Defra has been very tight lipped on the subject ever since last June. So what can we surmise?

I do not envisage a radical change in agricultural policy post 2019. The reason being is that Defra does not have the capability to design and implement any new policy in such a timescale. It often seems to struggle with the day job and now it must play its part in the Brexit negotiations which will include trade and the very thorny issue of fisheries. Coupled to those difficulties is the fact that it has little experience in policy creation as it has been able to leave it to the French for 40 years. Plus it has little ground level knowledge as it has no core staff outside London and it must also deal with the devolved administrations.

Thus I foresee “less of the same”. The policy structure will remain the same but direct payments will reduce to zero as they have no political support in Westminster and will be trashed by the media. “How long will the taper period be?” and “How much of the funding will be transferred to agri-environment support?” will be the key questions.

I am afraid that nor do I foresee a great bonfire of red tape. There will be some headline grabbers, such as the demise of the silly three crop rule, but the future of much of the regulation will be dependent on our trading relationship with the EU. In addition the green lobby seems to think that all EU environmental regulation is sacrosanct and must be defended at all cost.

Talking of trade, here lies the really dangerous “unknown”. The EU is currently by far our largest export customer and is particularly important for the lamb trade. Our markets are also protected by EU tariffs. Will we still be able to trade freely with the EU and will our internal markets be sacrificed for free trade with new partners? If the answers are “No” and “Yes”, UK agriculture, and particularly the red meat sector, will be in for a very nasty re-adjustment.

Change is constant and we are well used to price volatility, but we are also used to some stability on support and regulation as the CAP moves on a c7 year cycle. The difference post 2019 is that change could be fast and furious across all aspects of your business. Are you up for the challenge? Is your business structure fit for purpose? Will succession help your business succeed?

For those approaching the twilight of their farming career, could this be the moment to step aside and let the next generation take the lead? The forthcoming uncertainty will require energy, combined with speed of thought and action, in order to see the business through. How does your current business look with no direct subsidy? Significant changes may be required to the existing business model, which may involve increasing non-farming income.

At the very least, some no-holds barred discussions need to take place between those involved in the business, in order that all parties are aware of the threats and possible opportunities, and to ensure that the business is structured in the best possible way.

Yes, I am afraid that this does mean reviewing the paperwork. Does the Partnership Agreement properly reflect the current management of the business? Are the conditions of the tenancy being met? Is the FBT fit for purpose? Does the Contract Farming Agreement accommodate sufficient price volatility? If you are going to enter any new agreement, is it sufficiently flexible given the uncertainty ahead? While you are about it, you might as well check that your Will is up to date.

It seems that we have a 2-3 year window of relative stability before the post EU uncertainties kick-in. This surely is the opportunity to get your farming business into tip-top condition ready for the challenges ahead.

If you would like any further information or to discuss any rural related matter, please contact Tom Wills, head of the agriculture & estates department at Sintons.

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