Leaving the EU: FAQs for farmers, growers and the industry
From markets to farm economics, our FAQs cover a wide range of topics on the EU exit and signpost to more information.
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Markets and commodities
The implications of rules of origin are reportedly impacting a number of agricultural sectors. Simply put, rules of origin (ROO) determine where a certain product is made, and how much input from ‘third countries’ can be used in the making of that product.
For products like fresh meat, such as lamb carcasses, the rules are quite simple. The lamb must be solely sourced (known as wholly obtained) from the UK. For products like meat pies and ready meals, the rules become more complex. Generally, products have to undergo significant processing within the UK to qualify for preferential treatment, in addition to a number of terms and conditions as to how much third-party inputs can be used.
This is important for agriculture as it ensures, for both the UK and the EU, that third-party suppliers aren’t unfairly accessing one market or another without paying the required tariffs. However, it can have implications for UK and EU based businesses solely using EU/UK supplies.
The key change for supply chains is that, regardless of whether a particular product adheres to rules of origin or not, exporters will now have to provide proof of origin when exporting to the EU. This means extra admin and paperwork that many businesses won’t have previously been used to. This will add cost to the product and reduce the competitiveness of those products in relation to EU-27 members who won’t have to comply with rules of origin to supply the EU market.
This is an issue that AHDB will be monitoring and reporting on. For more information, you can read the Rules of Origin blog.
Although we are no longer part of the EU State Aid rules, we continue to be under the World Trade Organization (WTO) subsidy rules which are broadly similar on the main elements. These are that public money cannot be used in a way that could distort trade or give advantage to one business over another. So, we cannot now switch to “Buy British” messaging. However, we can continue to communicate origin (English/British) as a secondary message to the quality of our produce. We can also continue to use the words English and British to make statements of fact in the context of challenging mistruths. For example, our latest AHDB Eat Balanced marketing campaign used the headlines “Red meat and dairy from Britain has world-class food and farming standards” and “Red meat and dairy from Britain is amongst the most sustainable in the world”.
Defra have said they know from many surveys that there is a significant desire amongst the British public to buy British food. Part 2 of the National Food Strategy will be published in 2021. This independent review has highlighted the connection between environmentally sustainable farming and an effective food supply chain. Defra have said they are committed to continual improvement in their agricultural and food policies and will update objectives if necessary.
Exports of agriculture or lightly processed food products are in the region of £4.7bn with £3.8bn going to EU. Agri-food exports are £7.2bn, with approximately £5.4bn going to EU.
There is uncertainty regarding many aspects of Brexit, including the UK’s future trade relationship with the European Union. AHDB’s Horizon publication Brexit prospects for UK agri-food trade provides information on how the agri-food trade could be affected under both an agreed withdrawal and under a ‘no deal’ scenario.
The Northern Ireland (NI) protocol will ensure that there is no physical border between NI and the Republic of Ireland. This means that whilst NI will be in the UK customs territory, it will remain aligned to the rules of the single market, thus avoiding any physical checks between the two areas.
There is no trade deal between the US and the EU, so no continuity agreement, although negotiations are at an advanced stage between the UK and the US. Equally, Australia does not have a Free Trade Agreement (FTA) with the EU but are negotiating directly with the UK at the present time.
This will depend on:
- Access to export markets
- Equivalency agreements in export countries
The EU has agreed to recognise the UK as equivalent for organics until December 2023. This is on top of additional recognition by the EU of individual UK organic bodies.
Further to this, an agreement with the US on organic equivalency, which is like the previous EU-US equivalency agreement, has also been implemented from 1 Jan 2021.
This is a result of the failure by the EU to approve the UK as a third country exporter for seed potatoes and is being handled on the industry’s behalf by Defra. AHDB are not party to those negotiations. However, our information suggests that the EU will not change their position unless the UK agrees to dynamic regulatory alignment on standards, which is one of the UK’s so called ‘red lines’ so is not likely to happen. Also, the importation of seed from the EU has only been granted by the UK Government on a six-month temporary basis running until 30 June 2021. After this point, the UK Government have stated that they will reciprocate an arrangement put in place by the EU. In other words, if UK seed potato exports to the EU are still not permitted, the UK will not accept seed imports from the EU.
No, our modelling reflects the ‘first pass’ effect of leaving the EU and not the subsequent market adjustments.
UK maize import tariff is zero. EU maize import tariff is based on the difference between the effective EU intervention price multiplied by 1.55 and a representative cost, insurance and freight (CIF) import price for maize. This is usually at zero, so there’s not really much difference there.
The main factor will be the relative price of maize compared with feed wheat. For example, if maize prices competitively, then it’s expected that more of it would be imported.
There are a number of steps to be followed to export live animals and animal products from January 2021. Information on certification, tagging and getting your animals and animal products checked at an EU border and customs office, can be found at: https://www.gov.uk/guidance/exporting-animals-and-animal-products-to-the-eu-from-1-january-2021#exporting-or-moving-live-animals-and-animal-products
You can use the Transition Checker to get a personalised list of actions for trading from January 2021.
The NFU also have a checklist to help identify business risks and the level of exposure you have to the EU market.
Further guidance on exporting can be found on the EU Exit Food Hub.
Our information would suggest that most traders are now as prepared as they can be and are monitoring the evolving situation as closely as possible. Information on how to prepare is available on the AHDB website: https://ahdb.org.uk/eu-exit
EU Exit information for meat producers can be found on the British Meat Processors Association (BMPA) website: Brexit Information - BMPA
A devaluation of sterling relative to the euro would make imports more expensive and provide support to UK dairy product prices, flowing through into farmgate price.
A weaker pound also makes exports more competitive in global markets. Under the new Free Trade Agreement (FTA), a devaluation of sterling supports prices as it gives GB product competitive advantage in the EU and increases export sales. However, £/tonne returns would be lower.
There is no information available on the level of export activity by individual processors, but it would be those who get the greatest proportion of their revenues from exports.
Over time, however, domestic prices will align with export prices (on average) as processors direct products to the most profitable markets. The ability to export therefore helps to keep domestic prices in line with global values, and means all processors operating in the same product market will be influenced by export prices under free trade conditions.
Outside of Northern Ireland (NI), there is minimal raw milk exported for processing in Europe.
Under the NI Protocol, goods produced in NI can circulate freely throughout the EU. This would allow for the continuation of sending raw milk from the North to the Republic of Ireland (ROI) for processing without the addition of EU import tariffs.
There is currently no clarity on whether products made in ROI using raw milk from NI would be recognised as EU product when exporting to third countries under Free Trade Agreements. This could potentially limit the use of milk from NI for processing in the Republic.
In the situation that tariffs do apply to NI raw milk exports, there are two possible outcomes:
- Volumes in excess of NI processing capacity could be shipped to GB for processing. This would add significant cost and put downward pressure on NI farmgate prices.
- It may also lead to some restructuring of the industry – either increased investment in processing if there is export potential or a reduction of the milk pool to match domestic processing demand.
The UK is a net importer, and our prices are typically in line with EU averages, and in particular with Ireland, especially for standard mild Cheddar.
More than half of UK cheese export volumes are Cheddar and a further third fresh cheese. The main export destination is the EU, where prices are competitive. There are growing exports to North America and the Middle East for value-added Cheddar, which commands a premium price.
The vast majority of fresh cheese exports are directed to the EU market. The nature of EU/UK trade prior to the UK departure from the common market means prices will trend together.
Demand will likely not be directly impacted by our exit from the EU, rather indirectly through price.
AHDB analysis suggests that the price changes as a result of Brexit will depend on the trade deal we have with the EU. If we have a trade deal, price changes will be relatively small and mainly due to trade friction. If we do not have a trade deal with the EU, price changes will be much larger due to high tariff barriers and trade friction combined. The price changes will generally be downwards for sectors who are net exporters (lamb, barley) and upwards for sectors who are net importers (beef, pigs, potatoes). We will be examining the effect of future trade deals as they are agreed.
There will always be a market – consumers in Europe demand UK produced lamb and beef for its quality and taste, and it is highly valued in EU markets. However, the laws of supply and demand dictate that the large price rises that would result in the case of no-deal would make UK product more expensive, therefore less competitive. Hence, demand is likely to contract as consumers look for alternatives. If there is a trade deal with the EU, the price changes are likely to be smaller and the contraction in demand much smaller. However, in either case, it is prudent to explore new markets where demand for lamb and beef is growing, and there is a market for high quality, high-value product.
Family and labour
Existing employees living in the UK before 1 January 2021 can apply for settled status, this allows them to remain living and working in the UK after 30 June 2021.
For further information on the above, visit: https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk
Before 1 January 2021 EU, EEA and Swiss citizen job applicants can apply for a job and use a passport or national identity card as proof of right to work until 30 June 2021. You cannot discriminate against EU, EEA or Swiss applicants by asking for proof of settled status before this date.
From 1 January 2021 EU citizens looking to work in the UK will need to apply for a skilled worker visa. To apply for this visa, they need to show a job offer from an approved employer sponsor. Therefore, if you are looking to employ EU citizens after 1 January 2021, you should look into becoming an approved sponsor.
For further information on the above, visit: https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk
After 1 January, an EU worker will need a visa to work in the UK. They can get a visa if they have a job offer from an approved employee sponsor. To become an approved employee sponsor, please visit: https://www.gov.uk/uk-visa-sponsorship-employers
Information for EU nationals who wish to live and work in the UK after Brexit, is available on the Government website, here: https://www.gov.uk/settled-status-eu-citizens-families.
The Government has indicated that tariffs (in the form of the UK Global Tariff) will be in place from 1 January 2021 in the event of a no-deal.
More information on the UK Global Tariff can be found here: UK tariffs from 1 January 2021 - GOV.UK
Products of animal origin will require an Export Health Certificate. Information can be found on the Government website here.
For the most up-to-date information on certification, we would recommend contacting the Animal and Plant Health Agency Centre for International Trade - Carlisle
Agricultural Livestock Team (Exports of cattle, pigs, sheep and goats)
Live Animals Team (Exports of poultry and hatching eggs, birds, zoo and circus animals and all other live animals not covered by other teams)
From 1 January 2021, an export health certificate will be required for the export of products of animal origin to the EU. Export Health Certificates are official documents confirming that products of animal origin (POAO) consignments meet the health requirements of the EU.
While the web page mentions meat producers – it also applies to other POAO, which includes milk.
Useful link from Defra on Export Health Certificates: https://youtu.be/5Kp8Q6t20DI
In the event of a no-deal, depending on the type of animal by-product (ABP) exported, the exporter will either need:
- An export health certificate, which will need to be applied for in advance; or
- A model declaration which will need to be applied for in advance; or
- Official documentation from the competent authority permitting the export of the ABP from the UK which will need to be obtained in advance from the competent authority of the Member State of destination
Further information on animal by-product is also available at: Guidance - Export or move live animals and animal products to the EU from 1 January 2021
From 1 January 2021, businesses in Great Britain that export live sheep and goats (for breeding and production (fattening)) and their germplasm (semen, ova and embryos) to the EU will need to follow new processes.
There will be some additional steps you will need to take before your animals can be exported to the EU, including providing signed documentation from your veterinarian. The additional requirements are listed here:
Further information for exporters of live animals and on Export Health Certificates can be found here: Webinars for exporters of animals and products of animal origin to the EU - GOV.UK (www.gov.uk)
At the end of the transition period, the UK’s trading arrangement with the EU will change. From 1 January 2021, businesses in Great Britain that export live sheep and goats (for breeding and production (fattening)) and their germplasm (semen, ova and embryos) to the EU will need to follow new processes.
The requirements for sheep and goats and their germplasm are set out in Commission Regulation (EU) No 206/2010 (live animals) and Commission Decision 2010/472 (EU) (semen, ova and embryos).
From January 2021, additional checks will take place prior to export:
- The owner and veterinarian of the premises at which sheep/goats are housed or held prior to export will need to sign a declaration to say that, to their knowledge, the animals do not have (and have not been in contact with) specific key endemic diseases (listed in the Defra letter to veterinarians)
- The surveillance information held by the Animal and Plant Health Agency (APHA) on its Veterinary Investigation Diagnosis Analysis database (VIDA) for the holding will be assessed to examine whether there have been cases of these diseases within the relevant periods
More information can be found here:
The UK has retained the right to determine its own system of approval for actives so it may differ from the EU over time. Defra has recently announced approval for the use of neonicotinoids in emergency situations for sugar beet.
A phytosanitary certificate (PC) may be needed to export cereals. To get a PC, plants need to be inspected. More information, including inspection fees, can be found here: https://www.gov.uk/guidance/export-plants-and-plant-products-from-great-britain-and-northern-ireland
An overview of the process can be found here: 'Place of destination' checks on EU imports of plants and plant products from 1 January 2021 (nfuonline.com)
Information on importing and exporting plants and plant product from 1 January 2021 is available on the Government website.
From 1 January, all high-priority plants and plant products from the EU must have a phytosanitary (health) certificate (PC). You can check if plants you want to import from the EU are high priority online here.
From 1 April 2021, all regulated plants and plant products imported to England, Scotland or Wales from the EU must have PCs. You will not need a PC to import fruit and vegetables that have been processed and packaged (salads, sandwiches, frozen material) from the EU to GB from 1 April 2021.
New rules will be in place from 1 January 2021. Information on how to prepare can be found at: https://ahdb.org.uk/leaving-the-eu-prepare-January-2021.
Help prepare yourself and your business for change by reading about the characteristics of top performing farms.
The Brexit toolkit provides resources to help you look at improving various business areas.
Budgeting allows you to plan your business finances. Creating two budgets would enable you to compare the outcomes and put plans into place if the budget does not meet your financial needs.
Alternatively, sensitivity analysis can show the impact of an increase or decrease on key incomes or costs, for example, +/-£10/t on cereals. If you know where you need your business to perform, you can then plan or change accordingly.
It is difficult to determine how land prices will respond to the removal of direct payments due to the many factors influencing these prices. Ordinarily, it could be reasonably expected that land prices and rents would drop as a result of the removal of subsidies. However, in the middle of a pandemic with so much uncertainty regarding the economy, land is seen as a ‘safe-haven’ by investors, so might be in high demand. The speed at which the pandemic is brought under control and the economy recovers may be more of a determinant of land prices than an agricultural policy at this time.
The progressive reductions announced in Defra’s Agricultural Transition Plan will be applied to the payment the farmer would have otherwise received, e.g. the farmer’s 2021 Basic Payment Scheme payment will be calculated based on the entitlements and eligible land the farmer claims on in 2021 and the 2021 progressive reductions will be applied to that amount.
To see how this will affect your farm, please look at our business impact calculator: https://bic.ahdb.org.uk/
Yes, Defra has confirmed that existing schemes will remain open until the Environmental Land Management scheme (ELMs) is launched, and no one participating in these existing schemes will be disadvantaged when they transition to ELMs.
Environmental Land Management scheme (ELMs) won’t be a direct replacement for Basic Payment Scheme (BPS). Farmers and land managers will be rewarded for public goods they deliver on their land. There will be a range of actions included.
Defra are currently developing the approach that will be used to calculate payments for these actions within ELMs. Payments will be set to ensure that making environmental improvements is financially viable and fair, and to encourage a high level of participation, which will be critical to achieving Defra’s environmental objectives. In developing the approach to calculating payments, they are learning from current schemes, testing aspects through tests and trials, and are acutely aware that payments need to provide a fair return to participants if ELMs is to deliver on their challenging ambitions. More detail on payment rates will be published as and when the schemes launch.
Defra intend to run the Basic Payment Scheme (BPS) until 2024, which means that until then, you will need to continue to meet the BPS definition of a farmer to be eligible for payment under BPS. In 2024 Defra plan to replace BPS with delinked payments. This will mean there will no longer be a need to be a farmer to receive the payments as they are phased out over the rest of the agricultural transition.
Defra will publish details of the scheme and what it will pay for by June 2021 at the latest.
Farmers entering into new Countryside Stewardship agreements from 2021 will be able to break those agreements at agreed points without penalty (through annual break clauses) once they have secured a place in the Environmental Land Management scheme.
Defra is currently developing the approach they will use to calculate payments for the Environmental Land Management scheme (ELMs). Payments will be set to ensure that making environmental improvements is financially viable and fair, and to encourage a high level of participation, which will be critical to achieving their environmental objectives. In developing our approach to calculating payments, they are learning from current schemes, testing aspects through tests and trials, and are acutely aware that payments need to provide a fair return to participants if ELMs is to deliver on their challenging ambitions. More detail on payment rates will be published as and when the schemes launch.
The details are still being finalised; however, the plan is that Environmental Land Management scheme (ELMs) will work slightly differently than previous environment-based schemes. The way the Government pays for public goods will be different – less prescriptive, more choice and flexibility. The length of the agreements will be flexible according to individual circumstances and what farmers want to deliver through their agreements.
Defra has launched a notice of intent to publish a third call for Environmental Land Management Tests and Trials proposals to contribute to the design of the new Landscape Recovery component.
Test and Trials are a vehicle for engaging with a wide range of farmers, land managers and stakeholders to harness their ideas and conduct research towards understanding how parts of the new scheme work in a real-life environment.
To get involved in the Test and Trials work, you can register your interest here.
More information can be found at: Government unveils path to sustainable farming from 2021 - GOV.UK
The Sustainable Farming Incentive pilot is available to farmers who are currently Basic Payment Scheme (BPS) recipients. The scheme is intended to reward environmentally sustainable farming, and the pilot will test the scheme in real-world situations, making improvements using feedback from pilot farmers.
More information can be found at: EU Exit Perspectives: The Sustainable Farming Incentive – what’s in it for me? | AHDB
If you would like to express an interest in taking part in the pilot, please visit: www.gov.uk/government/publications/sustainable-farming-incentive-expression-of-interest
Defra will provide advice and guidance to farmers to help them make the right decisions for their circumstances and support them through the transition, including business planning and training.
The binary divide between advice and enforcement will also be broken down. There will be a modern approach to assurance and regulation with greater emphasis on advice and improvement.
Defra have also made important changes to new Countryside Stewardship agreements starting from 2021. For these agreements, they have developed a system of warnings to give agreement holders a chance to put things right, where this is possible, and still get paid; and offering signposting to advice or guidance to help get things right.
Transition support and productivity will represent roughly 10% of the total spend on farming for each of the first four years of the agricultural transition period, which is covered by the Government’s manifesto commitment to maintain current levels of spending in England. This is shown on page 26 of the Agricultural Transition Plan.
The Agricultural Transition Plan (ATP) gives a breakdown of spend into direct payments, transition support and agri-environment schemes. This total figure will be allocated to ELM components and other agri-environment, based on an assessment of how best to meet the goals in the 25 Year Environment Plan and net-zero emissions. We will review funding as we progress through the transition and make changes as necessary.
The idea behind the ELM scheme is to reward farmers for enhancing their environment. Details of the Sustainable Farming Incentive scheme, including payment details, should be published by June 2021 at the latest.
To see how changes in basic payment schemes (BPS) will impact your business, use the Business Impact Calculator
Our understanding of the ELMs scheme is that actions taken to provide public goods will be rewarded so the funding will be available to active farmers and land managers rather than the owners of the land. We will be making more information available as it is announced. For the latest information, please visit the AHDB website here.
All of the agreements will be flexible and tailored to the specific area of land. Tests and trials are currently being carried out to determine the best outcomes for a range of scenarios. Currently, there is no plan for specific areas of common land or the payment rates that individual outcomes will receive.
Potentially, natural flood management is one of the actions that are currently envisaged by Defra as part of the second tier of environmental goods, known as Local Nature Recovery. However, actions will be tailored to specific farm requirements, and there will not be a one-size-fits-all approach.
Tenant and landlord arrangements vary between agreements, and Defra want to design flexible schemes to work with those varied arrangements. They are engaging with different types of farmers and land managers to inform the development of ELMs, including tenant farmers and landlords, to ensure that ELMs is designed in a way that works to maximise the delivery of environmental benefits for all.
Defra’s plan is for the Sustainable Farming Incentive (SFI) element of the scheme to be open and accessible to all farmers, including tenant farmers, to help them contribute to important environmental outcomes whilst they continue to farm productively and profitably. The SFI will pay farmers for actions they take to farm in an environmentally sustainable way. Actions will be grouped into simple packages to make it as easy as possible for farmers to identify what actions are best suited to their land and farm types (including arable farms, lowland grazing farms, upland farms and mixed farming systems). All farms will be able to sign up. Defra will support these farmers to develop a whole farm plan to help make their land and their business sustainable.
In addition, the Environmental Land Management tests and trials programme is exploring how components of the Local Nature Recovery and Landscape Recovery elements might work in practice across different types of holdings and different types and lengths of tenancy agreements.
Landlords may encourage diversification as they are keen to keep the farms rented and being farmed. If you do have a particular issue, get in touch with the Tenant farmers association: https://www.tfa.org.uk
The best place to start a diversification is from a profitable business that is running smoothly. If you are at this point then you need to decide what sort of diversification would suit your farm and the people involved. This may be adding value to a product, utilising buildings differently or perhaps an off-farm venture. There are many options listed in the article below and links to possible funding support.
Defra is considering how to design schemes in a way that they offer a fair return for farmers and drive take-up. More information on payments under schemes will be published as and when the schemes launch.
There is scope to blend public and private funding and finance, including through mechanisms such as reverse auctions and marketplaces for ecosystems services that offer both public and private benefits. Defra plan to develop their policy proposition for how they might blend finance over the coming months, with a view to testing potential mechanisms through tests and trials and the National Pilot.
At the moment, the markets for carbon and biodiversity credits is growing. However, the market is currently hampered by a lack of consistent rules and standards, which is dampening down demand. The market for carbon is a little more buoyant than that for biodiversity. There are a number of potential providers for carbon offsets here in the UK that meet Government requirements, measured in tonnes of carbon dioxide equivalent (tCO²e).
Understand how the trees/peatland restoration can be verified by using third party auditors to ensure you have delivered enduring and additional carbon emissions reductions that are accurate.
Farmers can offer voluntary offsets to other industrial sectors that can’t economically or technically abate emissions. They would measure their footprint and then pay for credits to cover some or all of the emissions they can’t mitigate.
As a farmer or grower, you can, through an intermediary, be paid some or all of the carbon credits to offset the carbon through initiatives such as planting trees or restoring peatlands. With time there may be other options. When entering into such agreements, you need to be clear that you will continue to receive an income stream or sufficient up-front capital to maintain the project in perpetuity.
As a farmer, you would not trade carbon directly, nor is agriculture part of any statutory carbon or biodiversity trading scheme.
For details of schemes for carbon offsets, please see: https://www.woodlandcarboncode.org.uk/ and https://www.iucn-uk-peatlandprogramme.org/funding-finance/peatland-code/buyers
This is highly unlikely, but as supply becomes tighter, the price will increase.
Eligibility is still under development. Defra have said they hope to benefit tree, woodland and forest managers with tree health issues, and expand eligibility beyond the current offer, which may include hedgerows, roadside trees and trees in parks and parklands.
They will provide further details about eligibility when scheme guidance is published ahead of the pilot launch.
If you want to make your business more self-sufficient, a good place to start is analysing your farm’s key performance indicators and cost of production.
Use KPI Express to understand how your business is performing: https://kpiexpress.ahdb.org.uk/Home/Index
Farmbench can help you to evaluate your cost of production: https://farmbench.ahdb.org.uk/
To see how changes in basic payment schemes (BPS) will impact your business, use the Business Impact Calculator
If you are looking to increase margin within a business, there may be ways to increase the value of your product to your existing buyer/processor. Alternatively, you can look at cutting costs, which is a key characteristic of top-performing farms.
Adding value may be possible to some commodities, but there may be a large investment of capital, time and training required to achieve this.
Start by working out your profit requirement, the level of profit you need to cover drawings, loan repayments and tax. If the profit requirement is higher than your current profit level, you will need to increase income or cut costs.
Increasing income could include involvement with environmental schemes.
For pigs, Defra have identified emerging priorities from co-design with industry as:
- Improved biosecurity to control endemic pig diseases and help prevent the introduction of exotic disease threats.
- To eradicate endemic disease. Defra’s initial focus will be on Porcine Reproductive and Respiratory Syndrome virus, which is estimated to cost the industry around £26 million per annum
EU people living in the UK before 31 Dec 2020 can apply for settled status. Settled status cannot be applied for if not living in the UK.
For further information: https://www.gov.uk/guidance/employing-eu-citizens-in-the-uk
Our analysis of top-performing farms shows cost control as one of the key success factors. More information can be found in the Characteristics of top-performing farms publication.
To see how changes in basic payment schemes (BPS) will impact your business, use the Business Impact Calculator
Inputs and suppliers
FAQs coming soon.