Industry Trend Analysis - 'Cliff Edge' Brexit: Agribusiness - DEC 2017
BMI View: In the case of a 'cliff edge' Brexit, UK agriculture would face mixed impacts in the first 12 months: these would be positive for agricultural subsectors that run a trade deficit and negative for those that run a surplus. The sector would face strong headwinds over 12-24 months, as food price inflation would force the government to unilaterally ease import restrictions, thus increasing import competition and placing pressure on UK producers ' margins. Domestic subsidies and new trade deals would lead to a new equilibrium over the long term (2021+).
The probability of the UK leaving the EU in March 2019 with no transition arrangement or trade deal in place has risen in recent months given a lack of progress in negotiations and ongoing divisions within the UK government over how to proceed. While our core view remains for a transition period of up to two years to be eventually agreed by the two sides, in this article we look at the main channels through which a 'cliff edge' scenario would impact the UK agribusiness sector
The impacts of a cliff edge Brexit on UK agribusiness over six months would be mixed. Specifically, we expect that the impacts would be positive for producers of agricultural products in which the UK runs a trade deficit and negative for producers of agricultural products in which the UK runs a trade surplus.
|Cliff Edge Brexit Would Sink GBP|
|Exchange Rate - USD/GBP|
|Sources: Bloomberg, BMI|