In a shock referendum result the UK has voted by 52% to 48% to leave the European Union, leading to a period of increased political and economic uncertainty. The aftermath of the vote which saw the resignation of Prime Minister David Cameron, has also exposed renewed tensions within the UK, with majority votes to remain within Scotland and Northern Ireland. The UK has yet to trigger Article 50 of the Lisbon treaty, the formal mechanism by which a member state can leave the EU. That should be followed by 2 years of negotiations during which it is expected that the UK will attempt to maintain access to the EU single market.
The immediate market impacts were sharp, with the value of the pound falling to a 31 year low against the US dollar.with the currency at one point tumbling 11.1% to $1.3229. The FTSE 100 also fell sharply by 9% following the result, however it recovered to finish 3.2% down on the day following the result, and has slowly re-gained ground in the days since.
The long term impact on the UK and EU agricultural sector is still unclear, but likely to be profound in the long run. The NFU has called for a re-assurance from government that EU support schemes for UK farmers will remain in place until 2020, and have stated that they will campaign for the best possible access to markets within the EU and beyond. Outside of the EU, New Zealand farmers have also expressed concerns about the impact of the decision on lamb exports, however also acknowledged that there may be opportunities to work with the UK industry to secure a better outcome for farmers in both countries.
It is estimated that the Common Agricultural Policy (CAP) provides up to 55% of UK farm income – and farmers are already calling for a new “British” policy providing equal levels of support compared to farmers in the EU – which will still be their principle competitors.
Currently many aspects of the implementation of the CAP within the UK are devolved to the Scottish Parliament, and the Welsh and Northern Irish Assemblies, and it is likely that there will be a greater divergence of policy within the UK.
Some reports are suggesting that UK retailers will be looking to source more UK products – especially given the dramatic fall in the value of the pound, however some caution that there is an increased risk of a UK recession, which would offset any gains for the agricultural sector.
The exact nature of the UK’s future relationship with the EU is still very unclear, but the long-term future of British agriculture will depend on the policies replacing the CAP, and its ability to retain existing markets in the EU, and to secure new markets elsewhere.