Savills’ Forecast of Brexit’s Impact on Rural Sector

Posted on 22 April, 2016 by Chris Grigorovsky

The EU referendum has been a hot topic this week, with many industry experts presenting research that shows how the uncertainty is affecting the current commercial property market. We have been delving into a report produced by Savills which forecasts how it will see the commercial and rural change post referendum. If you haven’t already, you can check out our highlights of Savills’ forecast of the commercial sector.

EU - Leave or Stay?

Pre Referendum

  • The EU plays significant role in UK agricultural economy as 70% of food is imported from it.
  • Savills say there are currently no farm policies in place if Brexit happens. DEFRA ministers have said it’s up to the exit supporters to develop proposals.

Post Referendum

  • If the UK stays, then current commodity prices mean farm incomes will continue to be under constant pressure, and with interest rates in 2017 looking to rise, there’ll be a further squeeze on incomes.
  • With the resulting debt, it may increase the number of farms coming to market, which will most likely see smaller farms to be victim of this.
  • Supply isn’t expected to increase significantly.
  • Average farmland values expected to be under pressure in the short term, with greater distinctions by reference to land quality and location.
  • If the UK decides to leave, then it could retain some trade relationships with the Union.
  • A likely scenario would be that trade in agricultural commodities would operate via a Free Trade Agreement. This means that there would be lower tariffs than under World Trade Organisation rules. These tariffs would add cost to exports and reduce returns to farmers. However lower domestic grain prices might benefit livestock producers.
  • If the exit takes place, Savills says “farmers will have a couple of years’ ‘breathing space’ to understand the new rural policy and make plans to adapt to it.”
  • If there is a reduction in farm subsidies, there will be a greater negative effect on rents and land values.
  • The report concluded: “Some commentators have suggested significant falls in land values, but without any detail on alternative policies it is difficult to predict. Values are already under some pressure.

It seems the general theme is uncertainty, as no one truly knows the outcome until 23 June has been and gone. How are you finding the coverage of the referendum, do you feel informed enough to make a decision or is it still a mystery? Let us know in the comment section below.

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