As the EU referendum approaches, what should retailers consider when examining the impact of a Brexit on the food supply chain?

In this final article covering the top three EU referendum issues affecting UK retail, I shall focus on our domestic food supply chain, having previously discussed the impact on the ease and cost of moving goods across borders, and the regulatory environment for retail.

Although the UK’s rate of self-sufficiency has declined in recent years, 60% of the food consumed in the UK is still produced here, reflecting strong consumer demand for local produce.

Obviously, the ability of retailers to continue to meet that demand depends upon a viable domestic farming industry.

Today, farmers receive 55% of their income from EU Common Agricultural Policy (CAP) payments, and the National Farmers Union has said that the survival of some farms depends on these. A decision to leave the EU would certainly be a decision to leave the CAP and its payments. So how would UK farms survive without CAP support?

CAP’s pros and cons

Some advocates of leaving say that because the UK puts more into the CAP than it gets back in CAP payments, so the Treasury could afford to support UK farming at its existing level and still save money.

Some go further and say outside the EU, UK farming would be free of the restrictions and bureaucracy of the CAP, enabling it to become more innovative, productive and competitive.

In the longer term this may enable farmers to become less reliant on subsidies. A recent survey of young farmers suggests that this is a widely held view.

”Remaining removes the uncertainty surrounding financial support for farmers. However, it also means that farmers will continue to be bound by CAP rules which they, together with successive UK governments, have sought to reform”

Helen Dickinson

Although we do not know now how the UK government would approach the issue of farm subsidies or how to regulate the industry following Brexit, this must be a priority issue to address following any decision to leave.

CAP payments form such a large chunk of farming income that a prolonged period of uncertainty over government policy in this area could affect the ability of all parts of the supply chain to plan for the future, including how they might invest.

A vote to remain in the EU presents a different challenge. Remaining removes the uncertainty surrounding financial support for farmers: they will continue to receive CAP payments. However, it also means that farmers will continue to be bound by CAP rules which they, together with successive UK governments, have sought to reform.

Some reform has been achieved, and the CAP is now more market-orientated. Nevertheless, our farmers still work in a far more restrictive environment than many of their international competitors.

This puts them at a competitive disadvantage that can only be compensated by a combination of domestic subsidies for farmers themselves and high import tariffs on some food imported from outside the EU. The latter leads to higher prices for consumers.

Given that UK consumers demand a wide range of local food, much of which is produced on farms currently dependent on CAP support, it highlights why this area made it to our top three referendum issues.

I hope this series of articles has helped inform your understanding of the most important retail-specific questions/implications and would encourage you to exercise your vote on 23 June.

  • Helen Dickinson, chief executive, British Retail Consortium