Thomson Snell & Passmore LLP hosted a Brexit Breakfast for over 80 representatives from the Agriculture & Rural Affairs Sector, to discuss the opportunities and possible impact that Brexit will bring for their businesses after the UK leaves the EU (whenever that may be!).
The panel chaired by Gilbert Green, a partner at Thomson Snell & Passmore, consisted of four speakers:
• Richard Thomas – Director, BTF
• Doug Jackson – Senior Partner (Commercial & Farming) & NFU Group Secretary
• Colin Hall – Director, BTF and Manager, The 50 Club
• Rob Lister – Director, R & B S Finance
Richard Thomas commenced proceedings by discussing the last 18 months and its effect on land values, tenancies/rents and the market. Richard explained that back in June 2016 he stuck his neck on the line by predicting that the market would remain stable should the UK vote to leave the EU. Richard still believes this to be true and explained that the latest land values are showing an upward curve in the South East in the last six months. However there are variations north of the Thames.
Richard based his prediction on the “C-Word” – Confidence. Confidence drives the market and is keeping rental values stable. Richard went on to explain that there are four main factors which underpin this confidence in the land market. Namely, agricultural relief and rollover relief which is available to the industry, interest rates which have remained low for the longest period in history to date, direct support in the form of subsidies which are likely to continue post-Brexit and supply and demand.
In conclusion, Richard emphasised that he did not see land values materially changing post-Brexit in the South East and that “land is a safe port in a storm”.
Doug Jackson discussed the opportunities and risks that Brexit presents for British farming. He centred his discussion on regulations, policy and trade. Doug discussed the implications of a No Deal and the proposed Agriculture Bill. In the No Deal scenario, Doug explained that imports and exports will be heavily impacted, especially within the beef and sheep sectors and veterinary medicine. The forecast is that there would be a risk to 4 million jobs employed in the supply chain.
However, Doug did highlight that there may be some opportunity within the proposed Agriculture Bill to establish a competitive and fair environment. The draft bill drives integration of profitable food production with high environmental and animal welfare standards. Assuming we do leave the EU, UK politicians will have direct responsibility for ensuring that British farmers are protected against a reliance on overseas imports produced to lower standards.
Colin Hall discussed the effect on supply of seasonal and other agricultural workers. Colin explained that there are 460,000 workers in the sector, 300,000 of which are the business owners and their immediate family and 160,000 regular employees of which half are seasonal workers. The vast majority of these seasonal workers are EU nationals. Colin emphasised that one of the main threats of Brexit would be the loss of access to these skilled workers.
Colin explained that although the sector needs to embrace technology to combat this threat, this is at least 10 years away from being commercially viable. Therefore, the sector is still going to be heavily reliant on a seasonal workforce. If Brexit will limit access to this then an increase in productivity will need to ensue.
Colin outlined the effects of a withdrawal agreement and a No Deal scenario. With the existence of the withdrawal agreement, EU nationals could move, live and work in the UK up to 31 December 2020. If they have 5 years continuous employment they can apply for settled status. If they do not have 5 years continuous employment, they can apply for pre-settled status which would become settled status upon 5 years continuous employment. However, if the UK is to leave without a deal, there will be no special treatment for EU workers after 31 December 2020. Workers will be assessed on a UK skills based system and it remains to be seen whether agricultural workers will be seen as skilled.
Rob Lister discussed the financial implications, opportunities and impact of Brexit. Rob explained that the agricultural market benefits from support from private banks, unsecured lenders and high street banks.
From December 2012 to 2015, there was a 34.8% rise in the total lending to UK agriculture. This can be compared to December 2015 to 2018 where the rate slowed to 6%. However, the big 5 high street banks are optimistic for the future as they have money to lend due to a conservative past. Banks are looking to provide more support to existing farming customers and looking positively at new propositions.
There is now a greater choice available for financial support within the sector, with the rise of alternative banks and Peer to Peer lenders. Rob emphasised that farmers have major financial challenges ahead and they have and must continue to adapt. Any changes must be right for the farmer and his or her business.
Rob provided a list of financial factors to consider including planning for cashflow shortfalls, restructuring borrowing arrangements now, introducing a three year plan and talking to solicitors, accountants, land agents and bank managers in advance. Rob’s mantra is to “manage change before change manages you.”
At the beginning of the seminar, Gilbert Green posed the same series of questions that were given during the October 2017 Brexit Breakfast. This was to gauge whether views have changed in light of recent political dramas. In 2017, 76% favoured a soft Brexit. This year it reduced to 58%. In 2017, 45% stated that they were quite confident in regards to the economy in the next 12 months. This remained the same. In 2017, 34% of attendees saw export opportunities as a main benefit of Brexit. Whereas this year only 6% still held this view. The question was also posed to the audience as to who would vote for a second referendum. 53% voted for a second referendum to 47% against.
The event reinforced the fact that there is still a broad consensus of uncertainty for the future of the agricultural sector. Many attendees were concerned that the government would not properly recognise the importance of the sector and support them accordingly. Gilbert Green ended the discussions by lauding UK produce as some of the best in the world. If we can educate the public on where food comes from and increase production there are many opportunities for British farming post Brexit.