March 30 of 2019 will bring with it a major change: the United Kingdom’s exit from the European Union (EU) – or Brexit. The impact it will have on the economies of the EU’s countries has been widely discussed. But what will things look like for Europe’s agricultural markets?
Here are 5 predictions from the EU and the UK.
1. A drop in exports and GDP for EU countries…
“All the EU27 countries will be negatively affected by Brexit.” The author of this statement is the European Parliament (EP), in a report that analyses the event’s possible outcomes.
The numbers corroborate the affirmation. The EP predicts that agrifood exports from the EU27 to the UK will decrease by $34 billion (62%). The most affected sectors will be processed foods, white meats, and dairy. The EU’s GDP will also drop – by 0.3%.
The UK imports a lot of agricultural products from EU countries – especially cheese, beef, sheep and pork meat, rice, olive oil, and wine. Besides, it is the second largest of the EU28 countries and is “highly integrated with the EU27 in terms of trade and value chains,” the European Parliament adds.
However, according to the European Commission, “Brexit will be felt less in those sectors where there is product differentiation (e.g. quality products) or for those where the EU is the main world producer (e.g. olive oil).”
2. …and the same for the UK
EU agricultural markets will suffer from Brexit – but, according to informed predictions, it will be the UK that will struggle the most in the aftermath.
“The relationship between the UK and the EU27 is characterized by a marked dissymmetry. … The EU27 represents a large market and outlet for UK exporters, while the UK is, in comparison, a small market for EU27,” says the European Parliament.
The EP predicts that the UK’s GDP will drop by 2.3% as a result of Brexit. EU imports of agrifood products from the former should also decrease, by $19 billion.
The increase of UK exports to third countries and inter-EU trades post-Brexit will not be enough to compensate for this loss.
However, according to a report by the House of Lords of the British Parliament, the expectation on the UK’s side is that its position as a major importer of EU products will give the country a “strong position during trade negotiations for those products both with the EU and, after Brexit, with third countries.”
British consumers will directly feel the impact of the UK’s exit from the EU – the prices of agrifood products should rise by 4%.
The European Parliament predicts that the UK’s GDP will drop by 2.3% as a result of Brexit.
3. Slower, more bureaucratic trade
For the House of Lords, “preserving tariff and non-tariff barrier free trade with the EU should be a priority,” since “the EU is the single largest market for UK agriculture and food products.”
If, as a consequence of Brexit, barriers to exports to the EU materialize, “many of our agricultural producers, and our food manufacturers, would incur substantial costs.”
While worries of this kind have been expressed for all sectors of the UK’s economy, they are especially relevant for agriculture. “Customs procedures and associated delays would have a particularly strong negative impact on the agri-food sector, where products are often perishable and food supply chains are highly integrated across the UK and the EU,” the report warns.
There are also concerns related to food safety standards. “If UK and EU regulatory frameworks begin to differ after Brexit, there is a risk of substantial non-tariff barriers for agri-food producers.” This could lead to costlier and slower trade.
4. Ireland will suffer the most
The negative impacts of Brexit won’t be felt in the same proportion by all EU countries. The closer a nation is to the UK, the more it will feel the effects of its exit from the EU. Ireland, then, is going to feel Brexit’s impact the most, besides the UK itself.
It is predicted that the country’s GDP will drop by 3.4%, which represents more than $ 63.4B. (The UK’s GDP will drop by 2.3%.)
The meat sector is particularly vulnerable since Ireland exports more than 50% of its beef and pork meat to the UK.
5. Europeans will have a harder time finding work in UK agriculture
The UK depends on seasonal and permanent workers, both qualified and non-qualified, from the rest of the EU.
If measures to guarantee that these workers remain able to work in the UK are not taken, the agriculture sector will suffer. “The entire food supply chain will be adversely affected by any loss of access to that labour pool,” the British Parliament said.
Since the referendum that decided Brexit, British farmers have been reporting a decrease in the number of workers from EU coming into the sector, according to the BBC.
Overall, the panorama is not positive. But the European Commission notes: “an orderly UK withdrawal would include a transition period until the end of 2020, which would limit market impact in the short term.”