Brexit would bring trade, economy, and currency worries

A leave-the-EU campaign poster at a fishmongers in Romford, in east London.

The sector of the agriculture and food industry that seems to have most to fear from Brexit is beef, because of the large proportion of our current trade that goes to the UK. 

If Brexit happens, our beef sector could be fighting wars on three fronts.

In recent times there has been renewed talk of an EU trade deal with South American countries, which are major producers of beef. 

Even if no agreement is reached with them which opens the European market to them, there is the fear that Britain, after Brexit, would do so. 

And parallel with all this is the debate on global warming, Ireland’s likely failure to achieve targeted reductions in its greenhouse gas emissions, and possible pressure to reduce beef production.

Brexit would hit our cattle and beef sector hardest because Ireland accounted for 54% of UK imports of frozen beef, and close to 70% of UK imports of Fresh and Chilled Beef, in 2014.

Over the last 14 years, UK imports of beef have accounted for 25-30% of UK domestic use.

The EU27 (EU28 minus UK) would be a net exporter of about 200kt of beef, if the UK were to leave, rather than a net importer if the UK remained part of the block. This would likely lead to reduced EU beef prices.

The total value of UK agri-food imports in 2014 was €52.6 bn, while the value of UK agri-food exports was €25 bn. The UK runs a trade deficit in agri-food of about €27.6 bn.

The UK is a significant net importer across all categories of meat, with the exception of sheep meat. 

Trade is dominated by imports from other EU countries, except in the case of sheep meat, where imports from New Zealand and Australia are dominant..

UK imports of pig meat are dominated by Denmark, the Netherlands and Germany, though Ireland’s share at 9% is still important. 

In 2014, the UK accounted for about 3.6% of EU production of pig meat, and 6.4% of consumption. 

As a large net importer of pig meat, the removal of the UK from the EU would probably lead to lower prices, as with beef.

Close to 90% of UK lamb exports are shipped to EU markets. 

France alone took 50% of British exports in 2014. In the event of a Brexit resulting in increased barriers to trade faced by UK exporters of lamb, this would result in reduced competition for Irish lamb exports on the French and other continental EU markets. 

Ireland accounted for 28% of the value of UK cheese imports, with France, Germany and Italy 17%, 11% and 10% on respectively.

UK exports of cheese are also of significant value (about €500 m in 2014). Ireland accounted for 26% of the value of all UK cheese exports in 2014.

UK butter imports are also dominated by trade with Ireland. Ireland accounted for over 50% of the value of UK butter imports in 2014.

The beverage sector is the principal net export category within the UK’s agri-food trade. 

UK beverage exports are dominated by exports of spirits, (such as whisky and gin), while UK beverage imports are dominated by wine. 

UK exports are mostly to non-EU destinations, while imports of beverages are dominated by EU countries, though UK wine imports also have a significant non-EU component.

The Teagasc Brexit study looked at the trade effects. There are at least two other major issues.

One is the effect of Brexit on the UK economy. 

If the UK economy declines by 6% (as is forecast by the UK treasury in its report last week) then the volume and price of food imports demanded are likely to decline on top of any decline because of trade arrangements.

A second issue is that of currency. Will sterling go up or down ? 

I wouldn’t be writing this if I could forecast that outcome and many millions have been made and lost on currency speculation. But it is a further uncertainty. 

Of course sterling fluctuates at present, while Britain remains an EU member. But Brexit could lead to a once-off appreciation or depreciation in the value of sterling.

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