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Brexit Update Harper Adams University 9 June 2017

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Slides from a presentation for students at Harper Adams on 9 June 2017, day after the 2017 General Election. The voxvote poll is for live audience participation so it will not work on this version of the presentation.

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Brexit Update Harper Adams University 9 June 2017

  1. 1. Brexit, Farming and the Rural Economy Charles Cowap Please go to: Go.voxvote.com
  2. 2. What we know so far
  3. 3. The Referendum bbc.co.uk
  4. 4. The Act Royal Assent 16 March 2017
  5. 5. Article 50 • Notice 29 March 2017 • The letter …
  6. 6. Negotiations .. UK – Theresa May • Agree future partnership alongside withdrawal terms • Economic and security cooperation • Not Single Market • Early agreement about citizen rights • Implementation period • Irish border • Free trade agreement including dispute resolution EU – Donald Tusk • EU 27 to act as one • Nothing is agreed until everything is agreed • Phase One: withdrawal and citizen rights • Phase Two: overall understanding of future framework • Transitional arrangements may also be determined to extent necessary and legally possible • Any ‘extension’ subject to all EU rules • Gibralter
  7. 7. Timetable Event Date Article 50 triggered 29 March 2017 Two years to negotiate Brexit 29 March 2019 BPS and similar payments continue – Treasury guarantee Until 2020 ‘Business as Usual’ – cross compliance, greening BPS years 2017 and 2018 Basis of payment for two more years? 2019 and 2020? START OF FORMAL TALKS 19 June 2017???
  8. 8. Some of the key issues • Trade terms with EU – Single Market? • Trade terms with RoW (Rest of World) • Tariffs v Free Trade • Global outlook • Labour movement • Regulations • Payments • Will it take more than two years? • Two years guillotine?
  9. 9. Some of the key trade figures: who relies on whom for what? Agricultural Trade £40bn + imports 73% from EU c.£20 bn exports 50% to EU All goods £400 bn + imports 54% from EU c. £300 bn exports 50% to EU
  10. 10. International Trade agreements, eg USA … May 2017: Merkel persuades Trump that EU/US deal is priority … • Value of US exports in goods to EU, 2016: $270 Bn • Value of US imports in goods from EU, 2016: $417 Bn • So US/EU trade deficit $146 Bn • Value of US exports in goods to UK, 2016: $55.4 Bn • Value of US imports in goods from UK, 2016: $54.3 Bn • So US/UK trade surplus is $1.1 Bn
  11. 11. Some more key figures All images © BBC 2017
  12. 12. BBC, 9 May 2017 General Election 2017
  13. 13. General Election 8 June 2017 BBC, 9 May 2017
  14. 14. Trade Alternatives
  15. 15. EEA/EFTA ‘Norway’ version • Single market access • Free movement of capital, people and services • All Single Market rules apply • Pay – approx. 55% of UK rate per head ‘Swiss’ version • More complex version of Norway – a series of arrangements rather than just one
  16. 16. Customs Union • Turkey • Industrial products only • No agricultural trade, services • No free movement
  17. 17. Free Trade (1) • Chile, Canada, S Korea • Deal specifies area covered and on what terms • Partial at best • Eg some agricultural protection • No free movement • Regulations harmonised to some extent
  18. 18. Free Trade (2) • Singapore • Similar to free trade (1) but • Low import tariffs set unilaterally
  19. 19. WTO • USA, New Zealand • Tariff regimes
  20. 20. Global Trade Status - EFTA Efta 2017
  21. 21. State of EU Trade 2017 (EU 2017)
  22. 22. Brexit: What Should We Do? • Ostrich • Complete strategic review and fundamental business reshaping • Disinvest
  23. 23. The Brexit Ball • Known Knowns • Known Unknowns • Unknown Unknowns
  24. 24. Danger Students At Work Remember the Corn Production Act 1917 Agriculture Act 1920 Agriculture Act 1921
  25. 25. PAY NO SAY STAND ALONE NEW EUNO EU SHAFTED NEW WORLD ORDER HOBBLED WRECK North-South: The EU does not change much as a result of Brexit. UK signs a deal on EU terms (North) or ‘hard’ Brexit(South) East-West: Brexit provides a strong stimulus for EU Reform. EU emerges as a stronger and more unified entity (East) or falls apart (West) Take Aim at the Brexit Dartboard © Charles Cowap 2016
  26. 26. GET FIT AND ENGAGE
  27. 27. Farm Profits East of England Acres 471 Total Output 392,286 Total Variable Costs 141,021 Farm Gross Margin 251,265 Farm Overheads 221,083 'Profit' 30,182 BPS income included above -30,354 'Profit' before BPS -172 Farmer net worth 2,464,730 Investment 'return' 1%
  28. 28. GETTING FIT – THE BEST AND THE REST How is West Mids Looking? OUTPUTS, INPUTS AND INCOME PER FARM WEST MIDLANDS FBS FOR 2015 (1.2.2017) Area of farm (ha) 128 Acres 316 Total Output 207,363 Total Variable Costs 85,233 Farm Gross Margin 122,130 Farm Overheads 135,615 'Profit' -13,485 BPS income included above -20,599 'Profit' before BPS -34,084 WEST MIDLANDS FBS FOR 2015 (1.2.2017) Farmer net worth 1,807,766 Investment 'return' -1%
  29. 29. Perform! 1. Large Dairy Farms (£/Ha) Average Size 181 Gross Farm Output 3,404 Gross Profit 1,557 Overheads 1,480 Net Profit 76 Top 25% 157 4,147 2,157 1,469 689 BPS and Ag Env included above 174 164 Net Profit before BPS etc -98 525 FBS Benchmarking Data Years Ending late 2015/early 2016
  30. 30. Perform! 2. Large Cereal Farms FBS Benchmarking Data Years Ending late 2015/early 2016 Average Size 500 Gross Farm Output 1,468 Gross Profit 981 Overheads 792 Net Profit 189 Top 25% 524 1,579 1,158 699 459 BPS and Ag Env included above 209 211 Net Profit before BPS etc -20 249
  31. 31. BPS and Ag Env included above 207 213 Net Profit before BPS etc -57 73 Top 25% 338 1,823 1,032 746 286 Average Size 300 Gross Farm Output 1,906 Gross Profit 1,029 Overheads 879 Net Profit 150 Perform! 3. Large Mixed FBS Benchmarking Data Years Ending late 2015/early 2016
  32. 32. Engage! Huffington Post
  33. 33. Value from farming • Remember the Modulation Debate, December 2013? • Modulation at 9% or 15%? • RSPB and others said CAP was costing £400 per household and Pillar 2 payments give far better value for money so Defra must strike at 15% to Pillar 2 ….. • Farmers would be ruined at anything more than 9% to Pillar 2 • Owen Paterson split the difference at 13 ….
  34. 34. The Farming Argument was all about farmer fortunes • And not about Value at all • But Consider our milk and cheese consumption for example • Average dairy product consumption about 4 litres of raw milk a week, 220 l pa • Average yield 7,327 litres per cow • Each cow therefore supports 36 people • Cow needs 0.5 ha • Average herd 125 cows  feeding 4,500 people • Direct BPS etc say £210/ha • Cost per consumer for dairy product support £2.92 • And if you took it away??
  35. 35. Is ‘the way we do it’ the ‘way we should do it’ • Business planning and development • Risk sharing • Investment and maintenance expenditure • Key tenancy terms
  36. 36. Look on the bright side • EU never understood UK land tenure • Opportunity for own agricultural, rural and environment policies? • Change and disruption brings opportunity?
  37. 37. Other Factors • New forms of financial support • Planning regime • Succession and inheritance • Taxation • Supply chain relationships • Others?
  38. 38. https://landteach.wordpress.com/
  39. 39. To conclude: • Use what we know • Get in shape and stay in shape • Seek and use advice/R&D! • Promote the value of farming • Nutrition • Welfare • Water • Economy • Cultivate your networks in the hope that they will cultivate you • Engage with the public Please go to: Go.voxvote.com

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