Brexit: potential impacts on the economic welfare of UK farm households

ABSTRACT

This paper estimates the effects of potential post-Brexit UK trade and domestic agricultural policy scenarios on the economic welfare (real income) of farm households, at both regional (devolved administrations) and national level. Results show that depending on the selected scenario, particularly the retention or elimination of direct payments as currently provided under Pillar 1 of the Common Agricultural Policy (CAP), the impact varies significantly across farm types and devolved administrations. Given the substantial contribution of CAP direct payments to farm business income, their removal amplifies farm vulnerability. Hence, non-farm income is critical in safeguarding the economic welfare of most UK farm households.

KEYWORDS:

• Brexit
• UK
• farm household welfare
• trade policy scenario
• on- and non-farm income
• direct payment
• farm viability
• sustainability and vulnerability

JEL:

• C63
• C68
• D31
• Q12

ACKNOWLEDGEMENTS

The authors thank all members of the Advisory Panel for their contribution to the project. Many thanks too to the anonymous reviewers whose useful comments helped to improve the paper. The views expressed in this paper are those of the authors and not necessarily those of UK in a Changing Europe.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. See https://digitalpublications.parliament.scot/ResearchBriefings/Report/2019/11/18/Agriculture--Retained-EU-Law-and-Data---Scotland--Bill (last accessed November 9, 2019).

2. The studies by Bradley and Hill (2017, 2019) come closest, but their farm-level analyses were confined to England and they used group averages rather than individual farm-level data on which this research is based. Direct comparison with these studies is clouded further by differences in scenario specification and the derivation of projected prices changes. Nevertheless, the pattern of estimated impacts is similar.

3. For simplicity, CET is used throughout.

4. Non-farming income of the farmer and spouse/partner was identified according to income ranges only.

5. This condition was necessary because only the Northern Ireland FBS included a subsample of small farms of < 0.5 SLR.

Additional information

Funding

This research was funded by the Economic and Social Research Council (ESRC) [grant number ES/R001928/1] through its UK in a Changing Europe initiative.