InsightsInsight - Agriculture and Rural - POSTED: March 15 2018
Brexit Strategy – anticipating the unknown in farming and agriculture
Brexit represents a huge catalyst for change in all sectors, not least in farming and agriculture. The start of 2018 has seen plans for post–Brexit farm subsidies being set out. Speaking at two farmers’ conferences in January, Michael Gove discussed how post-Brexit subsidies might be structured.
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No one yet knows exactly how post-Brexit farming in the UK will look which makes planning for the inevitable changes ahead difficult.
Whilst subsidies at the current EU level are guaranteed until 2022, the existing BPS will be phased out, eventually ending in 2019. There will then be a five year “transition period” allowing farmers an adjustment period. Gove has commented that the current system of basing payments on the amount of land held as being “unjust”, giving most of the public money to those who have the most private wealth.
Under the post-Brexit system, farmers will receive public money for providing “public goods”. “Public goods” will include items such as planting woodland, boosting wildlife, improving water quality and increasing biodiversity. Gove’s new scheme aims to be accessible by any landowner or manager, rewarding businesses for what they actually do and paying those who work hard to preserve the environment. Whilst we have some idea as to what the underlying principles of the new subsidy system will be, how it will function and be structured remains unclear.
Other elements of the post-Brexit farming system are even more ambiguous. Gove has been criticised for focussing on the new payment system, rather than on new trade relationships with the EU and the rest of the world. These will have a significant impact, with concern that domestic farmers and the high standards they maintain will be compromised if imports of food produced with lower welfare or environment standards are permitted.
The best way of tackling the uncertainties ahead is considering what can be done now to help manage post-Brexit changes. It is impossible to predict the exact environment farmers will be operating within. However, it is possible to allow for this uncertainty by building flexibility into agreements and tenancies farmers and managers operate under.
As an example, farm business tenancies (FBTs) can be prepared to include an element of flexibility. Provisions such as break clauses can be built in to allow an FBT to be brought to an early end if changes take effect that mean it would be better to end the FBT, rather than continuing. As a further example, commercial agreements can also be prepared to include elements of flexibility, such as review provisions to enable terms of agreements to be re-negotiated and termination provisions enabling agreements to be brought to an early end.
Embrace change. The farming and agricultural sector is facing a period of unprecedented change and uncertainty. Taking action now in creating flexibility within agreements and tenancies will help best place farmers and the sector to face the uncertain times ahead. It will also enable farmers and managers to take full advantage of the potential benefits that will come with the new subsidy systems and other changes implemented.
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