UK farming and subsidies: a kiwi comparison (part two)

Unlike New Zealand, UK government plans are that, with Brexit looming, farmers will continue to receive the subsidies to 2021 with the tapering of payments through to 2027. This is a payment system worth £3 billion per annum to UK farmers. Mr Gove had stated, at the Oxford Farming Conference in 2018, these payments would be guaranteed up to the end of the Conservative Government in 2022. However, recent events in Westminster may change that.

With even more delays to Brexit and an election in full swing, the future tapering of payments could well be delayed too. We’re also still waiting for the Agricultural Bill’s second reading in the Commons. In the years to come, UK farmers will need to review their fixed costs, assess their direct costs of buying and look for efficiencies to compensate for the future loss of subsidies. Diversification has been a ‘buzz word’ in farming for several years, as farmers look to lessen the burden on income purely from crops or livestock and explore other possible avenues of revenue. The Government has said that farmers will receive payments for ‘public goods’, such as access to the countryside, planting meadows or improving air and water quality.

There are different ways to view what public money for public goods is: yes, we must protect the environment so that future generations can benefit from it. In contrast though, when we leave the EU, it would be sensible for the UK to increase productivity and become more self-sufficient and less reliant on imports. The UK is renowned for high standards of environmental and animal welfare; much higher than many of the countries we import from. However, often consumers have no concept of this as they look for the cheapest option.

Survival for UK farmers is partly dependent on being able to compete with these lower prices, as well as identifying ways to diversify their businesses. Farmers will want to tighten margins. Of course, we’d prefer this to be accomplished without cutting any corners which may harm the environment.

UK farmers will have to change their ways and move towards a more efficient and cost tight structure, incorporating cash flows and budgeting. They’ll need to look for diversification opportunities and begin to explore value-added farming products, if possible. In time, New Zealand farmers managed to adapt to the change, albeit they were hit with immediate change (and no cushion of tapered payments) and they have come out to be a big player on the world stage. Their loss of subsidy created the necessary avenue for innovation and efficiencies to allow the farming industry to flourish.

The next decade will, all being well, create more innovative and productive UK farmers, as the next generation comes through and begins to separate the wheat from the chaff.

Click here to read part one

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Laurie Hill