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Election – Quick Take

6 January 2020

Parliamentary deadlock broken – what next?  The Conservatives have gained a commanding Commons majority and will be able to get approval for just about anything they wish. This means that things will start to move quickly on; exiting the EU (expected by 31st January 2020), in negotiating longer term trade deals with the EU and others and in domestic policy reforms.  Whether these changes will be good or bad for agriculture and sectors within it, remains to be seen, but happen they will.

Agricultural support – relative stability until 2024 The Conservatives have pledged to keep the overall envelope of agricultural payments at current levels until 2024.  In Scotland Basic Payments will continue in 2020, followed by a transition period from 2021-2024 involving a continuation of direct support with some simplifications and piloting of new approaches.  Convergence money will help offset otherwise potential declines in LFASS payments.  Potentially this gives farm businesses a decent 5 year period of support in which to review their businesses, plan for and implement structural changes.  The trouble is even if support is relatively stable; market conditions in some sectors may change dramatically. Access to existing export markets such as lamb to the EU could be at risk while protection from global imports could be drastically reduced or removed all-together (as the UK’s tariff schedule indicates). My plea to farm businesses would be please don’t wait until year 4 or 5 to start the review process!

Labour  Many UK businesses such as soft fruit, vegetables, meat processing and others had been facing difficulties in recruiting EU citizens before the election, this problem will only be exacerbated by the emphatic Conservative win.  With the possibility of a second EU referendum gone EU nationals hesitating over their future in the UK will have little reason to stay beyond immediate issues such as jobs, money, and schools.  The UK government have indicated an increase in the SAWS seasonal workers scheme for EU nationals from 2,500 to 10,000 workers per year but this remain woefully inadequate against a demand for over 70,000 seasonal workers in food and agriculture and the much larger pool of permanent EU staff.

Trade – non EU  Presuming we leave the EU on 31st January trading relationships with many non-EU countries will change overnight as we will no longer be party to EU third party bilateral deals such as those with Canada.  While the UK has re-negotiated some of these agreements with individual countries many remain to be concluded.  This issue is of most significance to certain sectors dependent on non-EU trade such as seed potatoes.  For seed potatoes the good news is that the majority (but not all) UK exports to non-EU markets will have taken place by 31st January and this should leave around 8 months for new arrangements to be in place before the new season exports resume in October 2020.  However, unforeseen difficulties may arise in both seed potatoes and other sectors due to this change.

Trade – EU  The biggy.  Boris Johnson is planning to make it illegal for the UK to extend the transition period beyond 2020 – this is either genius or insanity; only time will tell.  Will it force the EU to up the pace and agree to accommodate our demands or will it force the UK to soften its planned departure from EU standards?  Again nobody can tell but what is certain is this plan leaves very little margin for error in what will be hugely complex negotiations, and if they fail, No Deal beckons with all the risks and uncertainties this implies for the food and agriculture sector.

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