The last two years has seen wide ranging opinion on what might occur when we leave the EU, but although the outcome is still uncertain, we are starting to get a better feel of what can be expected for the farming sector.
It is well documented that the key issues for farmers arising out of Brexit will be:
- The need for access to labour
- access to the common market for the import and export of products; and
- a subsidy scheme to replace Basic Payments.
So, are you planning for Brexit?
Hard Brexit v Soft Brexit v No Deal
While there are as many as eight scenarios for Brexit, there are two main themes regarding the trade deals which may be reached – the hard or soft Brexit approach. Hard Brexit would see the UK give up full access to the single market and the customs union meaning the UK would have full control over its borders, trade deals and laws. Meanwhile, soft Brexit would see the UK’s relationship remain as close as possible to the existing arrangements, still retaining full access to the single market but having no seat on the European Council.
A no-deal Brexit would have a similar outcome to ‘hard’ Brexit but with no transition period, so businesses would have to respond immediately to the change of being outside of the EU.
Basic Payment Scheme
Whether hard or soft Brexit, Basic Payments will no longer be claimed from Europe and the UK government will be free to determine how, if at all, these will be dealt with in future.
It is widely accepted that some form of subsidy will continue. Common thought is that payments will not be made on the basis of land area but rather on the environmental features and schemes that can be applied. Encouraging nature, wildlife and set aside are the most likely environmental schemes which will provide subsidies. Whilst bare pasture land will no longer warrant any form of subsidies. The question is – could your current business model survive these changes?
Surviving after Brexit
In these uncertain times it is an absolute must to plan ahead and get your business structure, succession plan, land ownerships and tenancies in order.
In particular, tenant farmers may feel the impact of a new subsidy system more than farmers who own their holdings. Diversification, environmental schemes etc. may not be allowed by your current tenancy agreement and so you must consider whether your current business set up can survive the impact of no subsidies – if not, can you approach your landlord and seek consent to certain other activities?
Farmers who own their holdings have the benefit of being able to freely diversify and if required can seek funding from a bank or lender which can be secured against land. But owners must ask themselves whether they fully understand what land they own and whether that ownership has actually passed to them, as we see many people who think they own land but actually don’t as the legalities were never dealt with. It is worth remembering that banks will want to see your business and succession plan and evidence of your assets, in order to calculate how much can be funded and over what term. So we urge farmers to have the conversation around who will succeed, how they will succeed and under what method. It is important to remember that these things should not be left entirely down to a Will as the risk of inheritance tax issues and disputes endangers the future of the farm and everything that has been worked hard for.
Whilst it is hoped that Brexit changes will lead to agricultural products being more profitable, and therefore the need for subsidies extinguished, the uncertainty around future trade deals is a factor that must be considered.
They key message we would ask you to take away from this article is to make sure you are planning for the future by engaging in open dialogue with your family about how to ensure succession and the future of the farm.
Until we have more certainty on if, when and on what terms Brexit will occur it really is a case of “watch this space”.