In the case of a no-deal Brexit, UK livestock could be subject to high tariffs inflating the price to export into the EU and consequently collapsing the demand in Europe for UK goods. As a response to this, ministers have proposed a plan that will buy livestock at set prices to stabilise demand, particularly for beef and lamb in the UK.
As reported by The Times, the Government proposes to buy beef and lamb for a predetermined price at the point of slaughter, as outlined in a plan being finalised by Michael Gove to take effect should the UK leave the EU on 31st October 2019 with no deal. The plan also involves the purchase of some crops and is predicted to cost £500 million to implement. Another crop expected to be badly affected alongside beef and lamb is barley exports, identified in the report ‘Brexit Prospects for Agri-Food’ by the AHDB. This report raised the opportunity for the UK to benefit from tariff-rate quotas (TRQs) at a zero or lower rate. These quotas allow products imported within a set quantity, to enter the EU market at a lower tariff rate than for quantities outside of the quota. There is potential for the TRQs to cover a large percentage of exports to reduce impact to the beef and lamb sectors, however, TRQs are limited and may not sufficiently cover all exports forgone under a no-deal.
The UK beef and sheep industry, should the UK leave the EU with a no-deal, will face tariffs amounting to 65 percent and 46 percent of wholesale value respectively (depending on the cut). At present, the UK exporting average from 2016 to 2018 for total beef products (including offal), is around 131,000 tonnes a year to the EU; valuing at over £392 million. Total UK sheepmeat exports to the EU (including offal), as an average from 2016-2018, totals just over 83,000 tonnes a year and amounts to a value of £354 million as reported by Andersons. In a time of Government planning for EU departure, industry representatives relay concerns and warnings for a no-deal exit. NFU President Minette Batters responded to Government technical notes on no-deal Brexit by saying: “These technical notices confirm in black and white what we already knew: a no deal scenario would be catastrophic for British agriculture. A scenario where farmers face an immediate trade embargo for many of their products would have devastating effects, and would severely threaten livelihoods and businesses.”
The proposed headage payments, which are designed to support livestock farmers, could form part of the post-EU national policy replacing the Common Agricultural Policy (CAP). However, concerns from industry leaders have been raised that the plan will not successfully replace the European demand for UK livestock and could last several years as the trade deals are established. In addition, it is well documented that headage payments distorted industry production when they were part of the CAP, so it remains to be seen how re-introduction would be sustainable.
The Andersons ‘Red Meat Route to Market Project Report’ was released at the end of May 2019. The report outlines the catastrophic impact no-deal could have on the £5 billion sector of beef and lamb. Key findings of the research show that impact on trade under a deal Brexit scenario would be relatively small, showing declining volume of exports at around 1 percent. Whereas, under a no-deal Brexit, combined exports of beef and lamb to the EU are expected to decline by 92.5 percent, adding that sheep meat price could decline by 24 percent under a no deal. The report concludes that protecting existing markets – both EU27 and domestic UK – is crucial to protecting the British beef and sheep markets but that there are also opportunities for development of overseas markets.
One such market for sheep meat producers could be Japan. Government has revealed a deal that could be worth £52 million over a period of 5 years.
Recent exploration of global trade deals have come off the back of research, including an AHDB Report released in June 2019 ‘Exploring Asia: Understanding consumer needs’. Asia currently represents 60 percent of the world’s population (4.5 billion), however, the region is still predicted to undergo rapid growth in upcoming years. The report emphasises opportunities for UK sheep meat as a result of changes in consumption and attitude in Japan. Changes in consumption patterns and consumer lifestyle are expected from a growth in middle-class populations who prioritise taste, health and convenience that will ultimately move them towards an increase in animal protein consumption. Japan’s aging and health conscious population, looks to consume food with ‘functional benefits’ like dairy that is claimed to provide probiotic benefits. Japanese consumers have lower levels of fat rejection than western consumers, associating fat in a lean cut of meat with tastiness. The report added a quarter of Japanese consumers believe a lean cut of meat is a healthy choice and that female consumers in Japan are moving more towards lamb as a healthy meat choice. All of these trends give rise to positivity over opportunities for new markets.
With a clear direction shown in Asia for a growing sheep meat market, the potential for sheep producers in the UK to benefit from a Japanese trade deal could be a boost to the industry. However, the length of the period to establish global deals is undetermined, with fears from industry leaders this could take years and not fully replace the current volume or value of export markets closer to the UK. Therefore, measures like the proposed headage payments may be essential at least in the short term.