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Uncertain future in store for farmers and food producers

By John Simpson

Published 09/08/2016

Brexit will impact on farming subsidies
Brexit will impact on farming subsidies

Farmers and food producers are demonstrating support for ostrich-style behaviour - heads in the sand. They are currently big contributors to the local economy. Following Brexit there are huge question marks over the future of these sectors.

Northern Ireland farms and food producers will soon be outside the EU. Probably in either 2019 or 2020, the UK will phase in a gradual exit from the EU common agriculture policies. A date will be set for the ending of farm support from the EU budget, including the ending of the arrangements to pay the Single Farm Payments (SFP), which recently sourced nearly £300m each year to local farmers.

There is, at the least, uncertainty on whether the UK government will want to take over and continue a support system similar to the SFP. Equally significantly, there are big questions about what responsibilities will transfer to the NI Executive.

The most challenging outcome for the NI Executive would be a decision that farm support was wholly a devolved responsibility, that Westminster would allocate an allowance for farm support to the local Budget (possibly less than the cost of the current SFP budget), and that the SFP system would be replaced in GB (leaving Northern Ireland to make our own decisions).

Local ministers would face difficult decisions. Should farm policies be reshaped to incentivise a stronger, leaner and more competitive farm sector or, if possible, should farm support adopt the socially softer format of maintaining and supporting a large number of non-viable farm units?

There are obvious Irish cross-border issues if farm support develops in differing ways north and south. Add the still uncertain rules on cross-border trade and any EU tariffs and then the Irish-NI border could become a serious legal and administrative hurdle replacing the present easy flowing arrangements.

For easy answers, farmers in NI might hope that the UK government would introduce a GB version of the SFP system and uplift our budget by an amount that allowed local ministers to apply the parity principle. No such assuran ce has been even tentatively suggested. Even if suggested, that does not necessarily mean that it would be a good idea.

If there are advantages for GB in attracting some food imports at lower world prices, the London perception may be that across GB the cost of farm support could now be reduced. Opening the GB food markets to world prices may be politically attractive and be followed by schemes to narrow down the cost of support for farm incomes.

Northern Ireland farming relies on large scale exports of dairy and meat products both to GB and international markets. For dairy products and meat products these will be markets at competitive prices and less attractive to small scale processors.

Any local farm income support mechanism is less likely to sustain support at the levels of the SFPs yet output prices may be squeezed.

This tension presents a difficult choice. Should NI use available support funding to favour larger producers and in contrast introduce schemes to encourage consolidation of farm businesses as well as product processing on a larger scale?

The EU scheme of SFPs has had the effect of supporting the current social structure of small farm businesses. That, indirectly, has added to the cost of the EU farm policies. The UK has traditionally operated with a more commercially viable farm structure with NI and parts of Scotland and Wales continuing to sustain smaller businesses.

In the restructuring of farm support, the Brexit debate and the negotiations for the terms of Brexit are likely to push the UK government into a less supportive series of policies. As London tries to restrain the budget costs of an inherited SFP system, the devolved regions have reason to be apprehensive.

Future farm policies are set to be a more complex policy nightmare.

Company report: Almac Group Ltd

The successful Almac Group, headquartered in Craigavon, brings together the parent holding company and a wide range of subsidiary companies with specialist interests in the commercialisation of pharmaceutical products.

Nine active subsidiary companies are registered in Northern Ireland, nine in the United States, two in Singapore and one each in Scotland and Japan. 

Group activities include the discovery of new drugs and the commercialisation of pharmaceutical products. This is backed by the extensive integrated research and development support and a range of specialised services within the pharmaceutical and biotechnology sectors. During the last year £5.4m was spent on research programmes for which there were deductions of £0.8m as R&D tax credits. In addition a further £1.2m of R&D tax credits was deducted from other expenses.

Annual turnover in 2014-15 increased by £52m to reach over £393m: 15% higher than in the previous year. The group has a substantial annual investment commitment which in 2014-15 cost over £12m.

Operating profits in 2014-15 recovered after a fall the previous year. At £29m operating profits were the best on record.

Outstanding bank borrowing fell in 2015 to nearly £23m compared to nearly £30m a year earlier.

In 2015, average employment increased to 3,554 people: up 8% during the year.

The value of shareholders’ funds at the year-end reached nearly £319m, £34m higher than a year earlier.

Belfast Telegraph

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