Category: Policy & Business

Supermarket Merger

The UK retail landscape is due for a major shake-up after it was announced that the country’s second and third largest supermarket groups were to merge.  Sainsbury’s will purchase Asda from its’ US owner Walmart for just under £3bn in cash, plus a 42% stake in the combined business.  This values Asda at £7.3bn.  The merged business would have over £50bn in annual sales and would overtake Tesco as Britain’s number one grocer with 31% market share (Tesco currently has 28%).  It is believed that both brands will continue in the short term, but operational efficiencies of £500m are being targeted.  Sainsbury’s has stated that customers would benefit, including promised price cuts of 10% on some regularly-purchased items.   The merger will have to pass the competition authorities and this could involve the forced sale of stores in areas where the two firms dominate.  However, the companies claim there is little geographic overlap, with Asda being stronger in the north and Sainsbury’s heartland being in the south.  The plan is for the deal to be concluded in the second half of 2019.  The concern for the food and farming sector will be the further concentration at the retail level and the huge market and pricing power such a merged business would wield. 

 

Brexit Committee Hearing

Speaking in front of the Commons Brexit committee on 25th April, Brexit secretary David Davis suggested that MPs would be allowed to vote to amend any Brexit deal in the autumn.  This means that the Prime Minister (PM) could be instructed by Parliament to seek changes.  This is an apparent U-turn on previous statements by the PM who said that Parliament would only get a take-it-or-leave-it choice.

Such comments are likely to give some hope to remain-leaning MPs that want, as a minimum, for the UK to remain in the Customs Union (but it should be noted that Mr Davis also stated that the expected Parliament to ‘uphold’ the Government’s policy of leaving the Customs Union).  The comment may also be an overture to remain-backing Conservatives who might vote against the Government in important House of Commons votes in the coming weeks. 

Mr Davis did point out that if MPs returned Theresa May to Brussels to renegotiate parts of the deal, then he was “not entirely sure how much force a government sent back with its tail between its legs by Parliament would have in such a negotiation.”

His comments come amidst reports in Bloomberg and the FT that Europe might be willing to strike a customs deal with Britain which mooted the possibility of setting up ‘UK-EU dialogue on trade’.  Although, Mr Davis claimed that it would be a failure if the UK ended up in a Customs Union, there appears to be efforts being made behind the scenes to arrive at a customs arrangement which officially places the UK officially outside of the EU Customs Union but still within the gravitational pull of the EU’s trading framework.

When speaking on Northern Ireland, where agri-food trade accounts for 45% of total goods trade with the Irish Republic, the Brexit Secretary mentioned that the Customs Union on its own would be insufficient to ensure a frictionless border after Brexit.  Mr Davies believes that the best solution was a comprehensive free trade deal in conjunction with a deal to recognise shared regulations and customs procedures. This would encompass mutual recognition on standards and all-island arrangements for agri-food (i.e. the island of Ireland being a single epidemiological unit for animal disease as it at present).

Mr Davis also acknowledged that if an ambitious deal, or alternative technological suggestions to avoid a hard border cannot be agreed with the EU, that a proposed ‘Plan c’ (backstop) to align all regulations was still a potential “emergency parachute”.  Some believe that the extension of Customs Union participation, beyond December 2020, as agreed in the transition phase, has emerged as a fall-back option as the Government’s alternative customs proposals will take time to implement.

The Brexit secretary also added that the Irish border question could wait until a final deal is struck in October, as issues around mutual recognition of standards and rules of origin would only bite from 2021. He saw the June deadline as being an “artificial” hurdle set by the EU side.  Brexit Committee MPs including its chair Hillary Benn expressed concern that an October deal would give Parliament very little time to scrutinise its implications properly which could even then be based on a mere political statement rather than a binding treaty.

It is unsurprising that on Northern Ireland, the can looks set to be kicked down the road yet again. It is by far the most complex and nuanced issue in the negotiations.  Some might argue that if agreement is reached on all other parts of the withdrawal deal with the EU and the framework for the future trading relationship, then the pressure exerted on the Irish Republic would ramp-up substantially. As the Brexit Secretary pointed out there is about £1 billion worth of trade between the Irish Republic and the UK each week, far more than North-South trade which for goods is estimated at €3.2 billion (£2.8bn) per annum. Any significant impact on this East-West trade would hurt the Irish economy.  If agreement is reached on all other major areas and Northern Ireland remains outstanding, the Irish Government could be forced to relent on some key issues.

CSS Deadlines

A reminder that the deadline for applications to the Hedgerows and Boundaries Grant scheme is 30th April.  And for those that are considering making an application to the CSS Mid-tier or one of the four new Wildlife Offers, application packs must be requested by 31st May.

BPS Roundup

As the 2018 BPS ‘claim season’  is nearing its end, just a few reminders.  The deadline for applications to be submitted, to avoid late application penalties, is midnight on May 15th.  This includes applications and supporting evidence for the Young Farmer Payment and applications to the National Reserve.  It is still possible to make a late application up to midnight on 11th June 2018 (usually 9th June but that’s a Saturday) but this will attract a 1% penalty for each working day late.  After the 11th June it is not possible to make an application to the 2018 scheme.

Where a claim has been submitted by 15th May it is possible to make certain amendments up until midnight on 31st May without penalty, these include:

  • adding a land parcel
  • increasing the eligible area of a land parcel
  • changing the land use of a land parcel
  • increasing the area required to be used to activate entitlements

These changes can also be made between 31st May and 11th June but will attract a penalty.  In addition, applicants can withdraw all or part of an application at anytime, as long as they have not been told of an inspection or any non-compliance within their application.

Drop-in Centres

The six drop-in centres (see below) are now open.  Originally they weren’t going to be open until 1st May.  These only offer a simple check and receipt service, but no other ‘support’.  Agents can request an appointment at any of the centres by emailing: [email protected] giving at least 48 hours notice.  Include in the email, the site, date and time of the requested appointment, also a CRN or PI number, contact details and the number of applications to be dropped off.  Centres will be open 9am until 5pm excluding weekends and the bank holiday until 14th May.  On 15th May Centres will close at the later time of 10pm.  Appointments can be requested between 9am and 4pm.  Appointments will not be confirmed.  RPA will only contact you if it needs to re-arrange a different time.

The six sites are at: Carlisle, Exeter, Newcastle, Reading, Workington and York.

Scottish Balancing Payments

The Scottish Government has commenced making top-up payments under the 2017 BPS.  Due to continuing problems with the computer system, a national loan scheme operated for the second year for BPS 2017 which paid 90% of the expected entitlement from November 2017.  The final 10% is now gradually being issued to the 18,000 eligible claimants, but it will be a slow process with batches of payments being made over the next few months.   The Rural Economy Secretary, Fergus Ewing, has promised that the ‘vast majority’ will be fully paid by the time the payment window ends on the 30th June this year.   

Three Crop Rule Derogation

The UK Farming Minister, George Eustice, has written to the EU Commission requesting a derogation from the Crop Diversification rules under Greening.  Widely known as the ‘three-crop rule’ the exemption has been requested in response to the wet, late spring affecting farmers’ ability to get spring crops planted – so disrupting cropping plans.  The application covers the whole of the UK.  The EU’s response is expected shortly.

CAP Reform

Whilst the UK focuses on its new Domestic Agricultural Policy (or policies), the reform of the Common Agricultural Policy is gathering momentum in the EU.  Draft proposal are now circulating in Brussels and, as is usual, the text has been widely leaked.  The following are some of the main points;

  • it is proposed to have a maximum ‘cap’ on payments, set at €60,000.  The calculation would allow claimants to offset labour costs when calculating the level of capping.  It is interesting to compare this with the capping proposals outlined in DEFRA’s consultation paper (see Feb article)
  • there would be a compulsory ‘redistributive payment’ which would shift funding from larger to smaller claimants (Wales operates such a system currently)
  • there would be greater emphasis on ‘generational renewal’ with a boost to Young Farmers Payments
  • also highlighted is a greater promotion of risk management tools (e.g. crop insurance) within agricultural businesses
  • as previously outlined, the EU-wide Greening and Cross-compliance rules would be scrapped.  Member States (or regions) would draw up bespoke plans for farm support in their territories, rather like current Rural Development plans, which will include what ‘conditionality’ will be placed on payments in terms of farm management practices.  Additional payments may well be offered for those farmers that go above the baseline standards
  • the jargon of the CAP looks set to change.  Rather than the BPS, the paper refers to BISS – ‘Basic Income Support for Sustainability’.

The driver behind some of these changes, especially capping, is the need to save money.  It has been suggested that the next Multi-annual Financial Framework (MFF), or EU Budget for 2021-2027 should see funds for the CAP cut by 6% to help make up the €12bn Brexit shortfall.  Only when the MFF is agreed (in the middle of next year, or possibly later), will the funding be clear.  It is not yet clear whether EU Farm Ministers will agree the structure of support first, or wait until the budget is known before confirming changes to the CAP.

Scottish Weather Aid

The Scottish Government has announced a £250,000 package of support for farmers affected by the recent extreme weather.  Most of the support will go to offset the cost of fallen stock collections, but there will be some extra funding for the RSABI.  The National Farmers Union of Scotland is calling for a speeding-up of the processing of for outstanding CAP payments (BPS balances; SUSSS, Beef calf scheme) and a derogation to be granted on the three-crop rule under Greening.

Brexit Update

The Government has seemingly suffered two setbacks in its plans for Brexit over the past few days.

Firstly, the House of Lord passed an amendment to the EU Withdrawal Bill by a majority of 123 asking the Government to look more closely at the option of remaining in the EU Customs Union.  Leaving the Customs Union is one of Theresa May’s ‘red lines’ in the negotiations.  Although the House of Commons can reject the amendment, it does increase pressure on the Government to reconsider its approach.

The second problem concerns Northern Ireland.  It has been reported in the Daily Telegraph that the EU has rejected all proposals put forward by the UK Government to try and square-the-circle of having no hard border, but still allowing the UK (and NI) to leave the Single Market and Customs Union.  The paper reports that the British plans were subject to a ‘systematic and forensic annihilation’ – indicating there is little appetite for compromise from the EU on this issue.

 

Bridging Payments Made

The RPA should now have made ‘bridging payments’ to all those yet to receive their 2017 Basic Payment.  As set out in our March article, these should be worth 75% of the expected payment (although there appears to be cases of where both more and less than this figure has actually been received).   Payments have gone to around 3,200 claimants, equating to around £117m.  Approximately 4% of claimants are yet to receive their full payments.  The speed at which full payments are being made seems to have slowed right down as resources in the RPA are moved elsewhere.