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Ag sector 'should start thinking now' about Brexit fallout

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So, next week Theresa May is to fire the starting gun on Brexit talks.

That starts a countdown of two years before – under rules laid down in the now infamous Article 50 - the UK departs from the European Union, whether a political deal has been agreed or not.

But that does not mean that Britons, including those in the food and agriculture sector, should wait until 2019 before they should act on Brexit, says Michael Aubrey, partner and joint leader of food and agribusiness at UK law firm Mills & Reeve.

Clearly where the talks lead the UK, and what agreements the country will make with its biggest trade partner, is difficult to predict.

'The key issue'

"That's the key issue – the uncertainty," says Mr Aubrey, who is speaking on Brexit at May's Agrimoney Live conference.

Indeed, that is all the more reason for the likes of farmers and agribusiness leaders to take a look forthwith at the potential ramifications.

It may be worth dealing with some matters and completing some deals during the pre-Brexit period.

"People should consider whether it is worth progressing matters now," says Mr Aubrey, while we know the rules that we are dealing with.

"When we are outside the EU, we will have a huge amount of completely new legislation to deal with", so if agreements will continue post-Brexit then it is important to build in flexibility.

Lesson from history

For instance, landowners who no longer wish to carry out farming operations themselves, may prefer contracting arrangements rather than tenancy agreements. These provide more flexibility for both parties and also enable the landowner to retain more control.

Mr Aubrey recalls the problems caused by the change in farm subsidy arrangements nearly 15 years ago, when the area-based single farm payment was introduced, replacing schemes such as dairy premium and arable area payments which were based on production.

In addition to attracting complaints of unfair subsidy from among WTO members, the reform raised the question of whether subsidies should be attached to the land or the person farming it – an important question in some arrangements.

This sparked confrontation between landowners and tenants, a tension avoided by landowners who farmed through contracting arrangements. Another reason why, ahead of Brexit, such arrangements look the "far better and safer way".

Legislation landscape

Nor should farming and food producers believe that, once outside the EU, they will be able to ignore all European rules and regulations.

First, they should remember that those which are "directly applicable" - often stemming from EU directives, and covering matters such as VAT, and the TUPE employment rules - will remain in force, having been transposed into UK law by a domestic Act of Parliament.

Secondly, the rules imposed by European Convention of Human Rights will still apply, as it is not affected by Brexit.

Furthermore, EU rules will still be relevant for UK goods exported to the EU.

Indeed, "farmers may have twice as much to think about", Mr Aubrey says, with potentially different rules for produce remaining within the UK or being exported elsewhere.

'Important industry'

With an eye to exports, as well as the sector's broader wellbeing, Mr Aubrey added that the needs of the UK agriculture and food sector should be paramount in Mrs May's mind as she opens talks on the terms of the country's departure from the EU, and on arrangements in the post-Brexit era.

"She has to appreciate the importance of the industry" in terms of trade as well as food security, Mr Aubrey says, "do not sell us short."

Of course, the UK is a major importer of Continental produce, including the likes French cheese and Italian Prosecco, as well as an exporter – a factor which should give us some bargaining power.

"We should try to keep tariffs down if we can, rather than get into a tit-for-tat situation."

Food vs car produers

The negative effects of the wrong decisions being made for the farming community would be widespread, not only because farmers are the caretakers of a large proportion of UK land but also because the importance of the agri sector to the economy – a dynamic often overlooked.

While the fate of car plants in the likes of Sunderland and Swindon has attracted a high profile since the UK voted in favour of Brexit "the number of people in farming, or dependent on it, is much greater than in the automotive sector that we hear so much about", Mr Aubrey says.

The rural sector also contributes more than the automotive sector to the UK economy.

Those involved in agriculture should work to change the public perception of the industry.

National law firm Mills & Reeve continues to analyse what Brexit means for clients across the UK and globally and has a dedicated web page for all things Brexit at www.mills-reeve.com/brexit

By Mike Verdin

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