If there is any certainty around Brexit it is that we are entering into a period of uncertainty like no other. Most people muddle through economic crashes, and recessions are seen by entrepreneurs as periods of disruption and therefore opportunity. The trouble with Brexit is that it is completely uncharted territory. Problems are easy to identify but any opportunities that may come look distant, ultra risky and more like wishful thinking upon investigation.
There Brexit scenario that’s beneficial in the short or even medium term for Scotland, and despite the unfettered faith and optimism of the Westminster Brexit team it may only provide insurmountable opportunities. Possibly the biggest worry for Scotland’s economy is felt in the fragile rural economy and the farming sector which sits at the centre of it. According to research by Scotland’s Rural Collage (SRUC) and data from the RESAS Farm Accounts Survey, some 50 per cent of Scottish farms are unprofitable without EU CAP payments. Some rural groups are even discussing the possibly of around 60 per cent of Scottish farmers going out of business if EU farm subsidies are not maintained by Westminster post Brexit.
Eighty-five per cent of Scottish farmland is classed as “less favoured areas” compared to only 15 per cent in England and so qualifies for extra support, so Scotland replies more heavily on the EU than the rest of mainland UK. Significant farm losses would create an economic rural crises that would devastate large swathes of Scotland, resulting in losses in tourism, slow infrastructure investment and reduce the economic clusters that support farming. These include, seed and fertiliser business, hauliers, vets, engineers, vehicle suppliers, food processors and abattoirs marketing and local builders and retailers that make up the fragile rural economy.
So will post Brexit UK be able to replace CAP payments and more importantly will they want to? France fought to keep CAP at 39 per cent of the EU budget against UK moves to cut it to 30 per cent and the UK’s EU rebate is essentially just a bribe the UK to accept EU agricultural subsidies. These bribes…er rebates, basically involve other nations paying chunks of the UK membership fee for us. France, for example, stump up £1.5 billion, Italy £1.2bn, Spain £700 million, Belgium and Germany £250m. Ireland, Denmark, Finland and even Greece, Poland and Portugal all pay £125m on the UK’s behalf each. The rest of the UK gets very little in CAP payments but, Scotland, with a population share of 8.4 per cent gets over 17 per cent of the UK’s EU farm subsidies.
It’s also not just the poorly run or even smaller farms that are at risk and such uncertainty over agricultural subsidies is deterring investment. The UK is major beef importer and if there are barriers to trade then farmers may see an opportunity to switch to beef production, but it’s a three-year set up cycle waiting for cattle to mature, with a hefty upfront investment that may or may not pay off. Those who have updated plant and machinery and adopted the most efficient farming practices have mostly borrowed heavily and so are most at risk of financial difficulty if revenues drop or interest rates go up (or both), ironically in farming terms Brexit is a shock that could lead to non-survival of the fittest.
The Great Repeal Bill aims to transfer powers currently held by Brussels back to the UK, but when it comes to agriculture it notes that devolution of agricultural powers to Scotland was undertaken on the understanding that we were EU members. That calls into question the next Conservative government’s intent on even allowing Scotland to keep the powers over agriculture it already has. According to Steven Thomson at the SRUC’s Land Economy, Environment and Society research group “The Great Repeal Bill doesn’t set out exactly what body will oversee rural regulation, audit and compliance post Brexit, what it will cost or what the standards going forward will be”. Can there be a bonfire of red tape when standards such as environmental designations, animal traceability, environmental regulations, animal health, food standards and safety, pesticides and workers rights will all presumably have to match EU standards if we wish to continue our vital trade with the EU? It’s not just farming, some 62 per cent of the UK seafood catch is landed in Scotland, mostly in rural areas, and 66 per cent of that is exported to the EU. So whereas trawler men don’t like the EU at all, the much larger onshore fish processing sector depends on single market access. Overall Scottish food and drink exports grew 8% last year to a record high of £5.5bn and 41 per cent of that was exported to the EU. A pattern is clearly developing that demonstrates that rural Scotland seems to be far more at risk from Brexit than the urban economy.
According to Amanda Burgauer, chair of Scottish Rural Action (SRA), rural communities are becoming increasingly worried about the risks of Brexit and concerned that their voice is not being heard. SRA seeks to encourage and support the development of an inclusive and sustainable Scottish rural community movement that empowers and connects them, providing a voice on such important uses. Such initiatives are part of the answer but with such uncertainty and in my opinion the highly probable significant reductions in agricultural subsides from Westminster post Brexit, we could be looking at significant rural economic crises that will demand a major intervention from the Scottish Government This just at a time when our economy will take a Brexit hit and where budgets are subject to ongoing austerity. Political observers may ask why then were rural economies the ones who came closest to voting for Brexit and why are certain Borders / Southern Scotland rural constituencies predicted to vote Conservative in the forthcoming election. The demographics of rural Scotland offer a hint to that seemingly ironic reality. Young people are far more positively inclined both to the EU and to independence and rural Scotland is losing young people at an alarming rate.
According to former Scottish Enterprise head economist Hervey Gibson, analysis of Census data shows 26 of 32 local authorities (mostly rural) lose young people as they leave to go to higher education. As there are insufficient graduate jobs back home, they do not return. Their careers are boosted by moving towards the centre.
So we can see the older often retired, less pro-EU and more pro union vote is therefore more influential and so rural Scotland is at a crossroads and split down the middle on what way to turn. Having been brought up in a rural market town (albeit on the other side of the border) I have experienced first hand how crucially important stability in the agricultural economy is to rural prosperity and frankly I fear for the worst.
You may also be interested in: Brexit threatens survival of many small firms, claims fine chocolates firm.