Overcoming challenges in the UK agricultural sector

The British agricultural sector faces a wide range of challenges over the coming years, from new regulations and trade agreements to the country’s changing climate.

While these big shifts pose difficulties, they also present opportunities. And those who can tackle these obstacles with foresight and resilience could see their businesses thrive.

In this article, we look at some of the key challenges facing the UK agricultural sector and how you can overcome them.

Post-Brexit regulatory changes

After the UK’s exit from the EU, the country has been diverging from the EU’s Common Agricultural Policy (CAP). However, this divergence has been uneven across the devolved powers in the UK, partly due to different farming practices but also for political reasons.

A key difference is the variation in available government subsidies and what conditions are attached. Generally speaking, farmers will often get less money and will need to meet more conditions, including stronger environmental commitments in Scotland.

Therefore, agricultural businesses need to be agile and aware of the differing approaches across the UK. Agility is particularly important, as we’re likely to see more regulatory changes in the coming years.

New trade arrangements

Another impact of Brexit has been the negotiation of new trade agreements which are also set to impact agriculture.

This started with deals with Australia and New Zealand. Critics are worried that these agreements could see UK producers lose out to agricultural imports from down under, but they may bring benefits too – such as cheaper machinery parts and access to new markets.

The UK is also awaiting accession to the CPTPP trans-pacific trade partnership. This could have similar implications: while UK producers can access new markets, they’ll also face fiercer competition from imports. It’s hard to predict how it will impact imports and exports, but lamb and pork producers could face bigger challenges while dairy and beef producers enjoy more opportunities.

Agribusinesses that are well positioned to tap into foreign markets or sell imports to UK consumers could get the most out of the new trade arrangements. Meanwhile, other firms may want to assess the risks that new deals could pose and adjust their strategy accordingly.

Climate change

Perhaps one of the biggest challenges facing UK agricultural firms is climate change. Not only could the UK’s weather systems shift, but new environmental regulations and market forces could impact the industry.

Shifting weather

It’s hard to predict how climate change will impact the UK, but many experts expect warmer temperatures along with more frequent extreme weather events. Farmers may want to start preparing for this sooner rather than later.

Land management changes, such as larger water reservoirs and planting more trees, could help a producer through extended dry spells. Trees could also help water retention during intense rainfall, while buffer strips could reduce soil erosion.

Diversification can also help, particularly if agriculture businesses plan for the likely future. For instance, growing edible nuts could become an increasingly viable option, while some expect the UK to soon become a major winemaking country.

Producers who can capitalise on this could thrive, while it also opens up opportunities for other businesses on either side of the supply chain.

Environmental regulation

New environmental regulation is another hurdle for agribusinesses. Although the ruling Conservative Party has recently signalled a watering down of its policy approach to climate change, a possible Labour victory at the next election could bring another shift to greener policy.

This may mean that government subsidies and grants across the UK come with more environmental conditions, such as climate change mitigation measures and nature restoration.

Meanwhile, other countries and trading blocs – particularly the EU – are bringing in regulations of their own with which foreign businesses must comply.

While the world undoubtedly needs to shift to greener practices, this could be difficult for agribusinesses. A good strategy is to get ahead of the curve and begin planning for or implementing green measures sooner rather than later. It’s also worth keeping an eye on government grants and schemes to help with the costs of meeting stricter green regulations.

Currency volatility

The ongoing heightened volatility in the currency markets could also pose a challenge to agricultural businesses. Whether buying a piece of machinery from overseas, regularly importing fertiliser, or exporting goods abroad, shifting exchange rates can create uncertainty and eat into revenue.

Agribusinesses can be particularly exposed to currency volatility, due to long lead times and the global nature of the food and drink industry. Therefore, it’s vital to develop a strategy to mitigate the risks and maximise profits.

For instance, forward contracts allow you to lock in an exchange rate for up to a year. While you won’t benefit if the rate improves, you will be protected from any negative shifts. In addition, you’ll be able to budget with certainty, knowing exactly how much you’ll receive when you transfer currencies.

Forward contracts are just one of the products we provide at Currencies Direct to help our customers get more from their money transfers. In addition to a range of transfer services, we also offer highly competitive exchange rates and specialist support tailored to your unique business needs.

If you want to find out more about how we can help you, get in touch.