On 31st January 2020, the UK left the European Union entering into an 11-month “transition period” to replace the legislation, trade deals and financial support that came as part of the union.
With nothing set in stone for many industries, this is a period of uncertainty and concern for the future, with them having to prepare for all eventualities. Rural industries and farming is an area of business that is feeling the Brexit uncertainty the most.
Since 1972, farmers and rural workers have relied heavily on subsidies from the EU as Britain was a net contributor. And these subsidies were hugely important to the industry. Estimates from the Department for Environment, Food and Rural Affairs (Defra) released in 2014 put UK farming incomes coming from the EU as high as 55%. Between 2014 and 2020 the subsidies received by UK farmers is expected to have been €28bn.
A third of the EU's annual €160bn budget is distributed as part of the Common Agricultural Policy. Rural industries in the UK have been a huge beneficiary of this, and while there is no suggestion that this funding can't be replaced, farmers are anxious about the next year. It is not a given that they will receive public funding going forward and the reality is they will have to diversify and run their land purely with business in mind, more than over the past 40 years.
Regardless of this a survey in Farmers Weekly, two months before the referendum in 2016 found that 58% of farmers backed Brexit. But the National Farmers Union claimed that figure was misleading with their estimates putting farmers support at 60:40 in favour of remain. The issue of rural finance around Brexit is a complicated one, and whatever farmers political opinions everyone is now adapting to the new reality.
Over the past few years, landowners have expanded their businesses into such diverse areas as adventure tourism, music events and film screenings, commercial woodland and holiday homes to offset. In terms of farming, new crops and ways of working have needed to be found to remain competitive. This need is likely to only increase after 2022 when the Common Agricultural Policy is fully removed.
With uncertainty as to where funding will come from and how farms will operate commercially after next year, many working in rural businesses will have to seek finance to help acquire the assets they need to progress and move their business forward.
This could be for new machinery, diversifying land or changing the direction of the business altogether but whatever the needs of rural businesses there is active financial support available on a deal that will help them progress.
As experts in Farm and Rural finance, here at Asset Finance Arena, we will be watching the developments leading up to January 2020 (and onwards to 2022) closely and working with our finance partners to provide the right support to help farms flourish regardless of the situation.
For now, rural workers and farmers watch to see which way the winds of change blow for their businesses but by the end of 2020 they should have a solid idea of what the new deal looks like and what is going to replace the subsidies from the EU.