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Farming community is divided on Brexit's perils and promises; Three months on from the referendum vote, Sarah Curzon considers how Welsh farmers are coming to terms with Brexit and the impact it could have on their financial futures.

The Brexit debate turned out to be as divisive within the farming community in Wales as it did for the rest of the country.

The constant stream of predictions and promises from politicians, businesses and groups from both camps did as much to create uncertainty as it did to help farmers make up their minds as sentiment moved from firmly "in" to a cautious "out" when votes were cast on June 23.

There were clearly lots of issues considered by the farming community and debates raged around EU regulation, freedom of movement and the need for casual labour, and the disconnect between politicians and the reality in rural Wales.

For most farmers, however, it came down to a question of protecting subsidies versus cutting red tape, of the relative certainty of the single market against the promise of unrestricted trade with other nations. In the end, it seemed that frustration felt by many about the current state of the industry led them to a belief that something radical was required if things were to improve.

A month after the vote, Broomfield & Alexander conducted its own survey amongst farmers at this year's Royal Welsh Show. When asked about how they felt Brexit would affect their business, 42% felt positive about the future compared to 37% who feared a negative impact.

The more optimistic respondents talked about release from red tape and the creation of new trading opportunities. When asked about life after EU subsidies, most felt that the UK Government would fill the gap, at least for a time, while some wanted Wales to emulate New Zealand's experience, where farmers reacted to the removal of subsidies in the 1980s by proving their entrepreneurial ability and responding to consumer demand rather than government subsidy requirements, and are now proud of their independent status.

When asked about the 12 months ahead, the positive outlook continued as 54% said they felt optimistic, compared to just 14% who saw a negative impact on the horizon.

Part of this may be the weak pound providing a short-term boost to farmers' exports, but there is also a resilience in the sector. Farmers are used to weathering storms, but many are also focused on making the most of the time before changes occur to put themselves in the best possible position.

UK ministers have since announced that basic single farm payments under the CAP will remain in place until at least 2020, but there is pressure on the Prime Minister from various quarters to link post-Brexit subsidies to environmental protection measures to maintain the protections currently provided by EU directives.

This debate is likely to prolong the uncertainty over agricultural subsidies for at least as long as the renegotiation of trade deals with EU member countries - which currently account for around 73% of the UK's agri-food exports - making 'flexibility' a key factor for British farmers in planning for their financial futures.

Farmers we spoke to at the Royal Welsh Show were also divided over how best to respond to the challenges of the future post-Brexit. Farms in Wales have been encouraged to diversify for a number of years through successive grant schemes and there is some evidence that the industry is responding.

The latest Welsh Government report into farm diversification, published in 2015, estimated that annual income from 'diversified enterprises' increased by 7% to PS15m. However, this still represents less than 5% of all farm income in Wales, compared to the Single Farm Payment which accounted for 74%.

With question marks over the future of this subsidy, this figure is going to need to rise further and our survey suggests that diversification is being considered more widely.

Diversification presents many different challenges for farmers, including funding, appropriate legal structures and negotiating the various legislative and taxation issues that may arise. Changes in profit averaging rules and challenges to loss relief are important current issues for farmers to consider.

This may explain why less than 10% of Welsh farms currently receive income from diversified activities (this figure is lower if you discount those that simply rent out buildings or land); and why, for the vast majority who do, it rarely accounts for more than a quarter of their total income.

While thinking creatively is important, thorough and effective planning is often crucial to whether a farm's business plan is successful. Issues like succession and tax planning, anticipating changes in legislation and addressing the practical as well as financial implications of diversification all need to form part of that planning.

Overall, driving profitability and efficiency will reduce reliance on subsidies. This can be achieved through diversification and investment but, with the right support, more radical and complex routes such as co-operatives, share farming and mergers could be considered.

However, as the implications of Brexit become clearer, whatever the final relationship looks like, simply doing nothing is not a viable option.

Sarah Curzon is director at Broomfield & Alexander


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Title Annotation:Features
Publication:Western Mail (Cardiff, Wales)
Geographic Code:4EUUK
Date:Sep 20, 2016
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