Brexit means the rural economy must change

Twelve months further into the UK's attempts to leave the EU, the issues and uncertainties that Brexit has brought to the plate of Scotland’s farmers, crofters and food and drink sector have only deepened.

It was a year that was supposed to see resolution.

Fundamental questions remain about future market access, the availability of seasonal labour, fears over tariffs, the future of subsidy support and doubts over the future strength of geographical indications.

These and many other Brexit-related issues remain alive in the planning process for Scotland’s farmers, fisheries and aquaculture.

Jonnie Hall, director of policy for NFU Scotland, wrote in a recent blog on the union’s website that this is nothing short of a “defining moment” in Scotland’s agriculture sector.

This is not just because of the chaos of the Brexit process, but because, over the next decade, Scotland’s agriculture is facing the twin challenges of delivering its part in achieving the Scottish Government’s climate change ambitions and delivering the growth targets of ‘Ambition 2030’.

This cross-industry and Scottish Government-backed policy would, if achieved, double the turnover of Scotland’s farm, fishing, food and drink sectors by 2030 to £15bn. Ensuring compatibility between these aims may yet be the real test ahead.

For NFU Scotland’s president, Andrew McCornick, whilst there is no silver lining to Brexit, the issues and associated uncertainties have provided a moment in which the industry can reflect on its future.

“Most farmers and crofters have basically just got their heads down and they’re just going to carry on,” McCornick says.

“There’s nothing to tell us what we can do going forward, there’s no new guidance out there saying this is what the new market is, so what can we do but what we’ve done previously?

“But there are positives in it as well, and I can see that the industry was needing to reflect on what it was doing and how it was doing it. This has maybe been a really good wake-up call and maybe we are going to have to be a bit more business-like in what we are doing to make ensure that we can get through this.

“So I think it’s good in that it is making people think and reflect more on how they’re running their business, but it’s going to be a more challenging market.

“As an industry we should be more market-orientated. We shouldn’t be gearing up businesses around support payments or investment from government to keep them going. But equally we are such an important part of the rural economy, and were such an important part of the ambition for ‘Scotland’s Food and Drink 2030’, that we cannot destroy it, because the minute it gets damaged or destroyed there is a chance that it will never be reinstated to what it was.”

If Brexit has remained a hallmark of 2018/19, then it is not alone with the rapid rise of climate change and the role that agriculture and the food and drink sectors can play in meeting the Scottish Government’s revised targets also being prominent.

But, with a slew of new innovation initiatives being launched by government aimed at increasing the greening of agriculture, some in the sector feel that the contribution agriculture already makes to the fight against climate change has been both misunderstood and misrepresented.

From the NFU Scotland perspective, the issue is one that unites the drive for progress across the industry, as McCornick explains: “Part of that defining moment, which is another challenge that’s coming at us, is climate change. We want to be a part of the solution in this. We feel that we’re getting vilified a little bit because the science is not robust enough, they’re not giving us the credit for the things we are doing on the farm.

“They’re telling us about the gross outputs and all the rest of it and we know what’s coming out, like diesel exhaust emissions, but look at what we are doing at the other end of the equation to actually counter it, and we’re not getting the credit for it. So that’s part of the defining moment that we are at.

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“The whole thing is really challenging, but if we are brave enough and bold enough we should be able to work our way through this and come up with solutions that will help to drive the industry forward, and help to drive the Scottish economy and the British economy forward as well.”

Scientific innovation could be key, he adds.

“We’ve got a great scientific culture within Scotland, we’ve got some of the best scientists, but we need to be looking at delivering this at a farm level. We can be doing a smarter job, doing less damage to the environment and I think the ambition is there, especially in the next generation.”

But, for McCornick and NFU Scotland, aside from the vacuum of Brexit, in which significant sections of Scotland’s rural economy are currently trapped, agriculture needs certainties over the future direction of travel for the industry.

“What we need now to happen”, McCornick states, “is for a clear and robust future agriculture policy to be laid in front of us to give us a direction to travel in.

“We’ve put documents out, change documents, encompassing some of what the government has already done, and these documents show a way that this can be done.

“We’ve highlighted that if you are rewarding farmers or supporting farmers, do it based on activity and not because they’re occupying land or simply owning land. Drive it through activity and make that activity part of the productivity improvements, part of the climate change improvements, part of the environmental improvements everybody is looking for. That will help to drive the market forward and it will also help to drive the change the industry needs.”

And the issue of future trading relationships and market access beyond Brexit is also, for McCornick, at the centre of the union’s concerns: “At the back of all of that, they can’t undermine us for producing to high standards if they are allowing produce to come in of a lesser standard from elsewhere in the world to undermine the market.

“It’s a real threat, especially with some of the messages that we’re getting from the debate that came about because of the referendum on Europe.

“People were talking about food being cheaper. The only way food can be cheaper is if it is produced at a lesser standard than what we are doing, and I would say that we are operating at the top end of production and welfare standards.”

Away from Brexit, renewed support for the marketing of Scottish lamb from the Scottish Government has been roundly welcomed in the sector, and has been greeted by calls from the Scottish Crofting Federation for increased support for abattoirs in remote areas that would be capable of supporting an expansion in value-adding processing projects.

The opportunity for value-adding in the beef and lamb sector remains high, with a base contribution to Scotland’s economy already over £2bn – but again, so much depends on post-Brexit market access.

This summer the UK government starts its consultation process on the regulation of diary contracts, and the outcome of that process could be crucial for Scotland’s diary sector. The securing of fair contract terms, transparency and a shared commitment to those terms are widely seen as being vital for Scotland’s dairy farmers and processors and, for McCornick and NFU Scotland, there is the potential for a significant positive impact in the move.

“I think there’s real room to make a big difference in here,” he says.

“We saw how things could go wrong before with people who were on aligned contracts getting 30p a litre [for milk], and people that were in, I would say, the free market down as getting 12.5p as litre. We need to have transparency in here.

“There was voluntary code of practice in place and that was supposed to help deliver a fair warning to anybody that there was going to be a change in their supply and demand and all of that, but it was all bits and pieces.”

Some producers then saw their milk drop from 25p a litre to 15p a litre by the time it had reached market.

“If you get a proper contract in place, everybody understands you supply me with this and I’ll try and deliver that price to you, and if I’m going to change that price I’ll give you notice. We need to get everybody working around that basis. It’s far fairer. And again, the milk buyers and the milk processors will then be able to do the same at the other end.”

If farmers come together, they can deliver sustainable contracts, he suggests.

“We’ve been pushing hard to try and get this delivered and there should be nothing to fear from it […] and it could stop some of the rogue milk buyers getting away with the things they shouldn’t be getting away with.”   

But while farming faces up to its own new challenges, the overall rural economy also faces age-old issues of remoteness, connectivity, housing and talent retention.

The need to diversify the rural economy is widely recognised, but whether it comes as the expansion of tourism and holiday lets at the cost of the ability for people to live and work in rural communities remains to be seen.

Digital infrastructure is often raised as a major factor which can inhibit growth, but housing is increasingly recognised as an issue.

In February, concerns over the lower level of investment in affordable housing in rural areas in comparison to the urban setting were raised by Derek Logie of Rural Housing Scotland.

“Young people across the countryside are unable to find somewhere affordable to live,” he said.

“There is much less council and social housing in rural Scotland, and demand for second homes and holiday lets is reducing the number of private lets and increasing house prices.”

Amendments to the Planning (Scotland) Bill have set out the potential for planning to be much more focused on enabling rural development. Perhaps, once the Brexit dust has settled, there can be a way to encourage a return to inhabitation for Scotland’s depopulated areas.