Category: Policy & Business

BPS and Environment Scheme Claims

England

The BPS application window and the Countryside Stewardship (CS) and Environmental Stewardship (ES) annual revenue claim submission period is now open.  The deadline for submission for all three schemes, without incurring a penalty is 17th May this year, as 15th May falls on a Saturday.  This includes Young and New Farmer applications and is also the deadline date for transferring entitlements in England to be used for the 2021 claim.  Applications or revenue claims made between 17th May and 11th June will be accepted but will receive a penalty for each working day late.  Any submitted after 11th June will not be processed.

Certain changes can be made to a BPS application which is submitted by 17th May, without penalty, until 11th June (in previous years the date was 31st May).  This means, in some circumstances, if the deadline is close, it might be worth submitting the claim and making the amendments afterwards.  For CS revenue claims made by 17th May, certain amendments can be made up until 31st May without penalty.  A few changes have been made to the BPS scheme rules this year,

  • A reminder that all three of the Greening requirements – EFAs, Crop Diversification and Permanent Pasture retention, have been removed.  But farmers must still meet the cross-compliance rules including on hedges and buffer strips etc.  With regards to Permanent Pasture, even though the Greening rules have been abolished, it must not be ploughed if it is a Natura 2000 site, or has not been cultivated for 15 years or is semi-natural grassland; an Environmental Impact Assessment (EIA) screening remains a requirement in such cases.
  • Cross Border applications have been abolished.  Only land located in England should be applied for on the BP5 form or through Rural Payments online.  Land located in other parts of the UK must claimed via the appropriate devolved administration.
  • The entitlement usage rule has also been abolished.  From 2021 onwards, farmers do not have to use all their entitlements in one claim, at least once in every two years to avoid using them.  Unused entitlements do not have to be leased or sold.
  • There will be no option to be paid in Euros.  Entitlement values will be shown in Sterling and payments will be calculated in Sterling rather than using an exchange rate.

There have been a few simplifications to the Rural Payments online site, mainly due to the removal of the Greening requirements.  This means the EFA section of the application ‘form’ has been removed, the tab to ‘reduce the EFA area’ has also gone and the ‘Declarations’ are a lot simpler; no Organic Exemption required, payment in Euros removed and Cross Border farms.  The Hedge View remains, partly because it was so costly to design, but also as it may be useful for agri-environment scheme applications.  But reference to the hedge being available for EFAs has been removed.

All guidance and forms required to make a BPS application can be found at https://www.gov.uk/government/collections/bps-2021

Guidance on making a CS revenue claim can be found at https://www.gov.uk/guidance/countryside-stewardship-2021-how-to-submit-a-revenue-claim-online

Wales

The Single Application Form (SAF) claim window is now open.  It closes on 17th May.  Applications can still be submitted until 11th June but these will receive late penalties.  Any claims received after 11th June will not be accepted.  The deadline date for transferring entitlements in Wales, to be used for the 2021 claim, is the 15th May.  The submission date for BPS Supporting Documents (except for growing Hemp) has been extended until 31st December 2021.  But for other schemes (Glastir), SAF deadlines continue to apply.  Other changes in Wales include;

  • Greening has been removed.  Although Environmentally Sensitive Permanent Grass (ESPG) is now protected as part of Cross Compliance.
  • The Negative List has been abolished.  This was the Active Farmer Test for businesses operating other activities such as airports, water works, railways etc. which rendered the claimant ineligible.

Scotland

The Single Application Form (SAF) window opened on 15th March and closes on 17th May 2021.  The entitlement transfer window closes on 2nd April.  In Scotland, a reminder that the Crop Diversification (CD) requirements under Greening have been abolished from 2021.  Claimants are advised to ignore any reference to the CD requirements on the claim form.  (Rural Payments Scotland is considering removing the references for next year’s claim.)  But Ecological Focus Areas (EFAs) are still required in Scotland.

 

 

AHDB Report on Future US Trade Deal

The latest AHDB Horizon report, published on 18th March, examines the potential impact of a trade deal with the US.  It acknowledges that, being an agricultural powerhouse, any enhanced access for US suppliers into the UK would pose competitive pressures for UK farming.  However, it suggests that fears of a glut of cheap food, produced to lower standards flooding the UK market might be misplaced.

The report highlights the adaptability of US supply-chains to meet varying standards, if there are sufficient margins.   Furthermore, a market of 330 million affluent consumers will also present opportunities for high-quality UK exports. Indeed, exports of British products such as regional cheeses and whisky have risen significantly in the past decade and in the past year, the US market for beef exports has reopened.

Whilst a US trade deal would have a significant impact on UK farming, it is unlikely that an agreement will be concluded any time soon as the Biden administration has more pressing priorities.  In the more immediate future, trade deals with Australia and New Zealand are much more likely to be finalised.  These too will have a significant impact on UK farming and the industry needs to prepare for these as a priority.

The AHDB Horizon report can be accessed via: https://ahdb.org.uk/uk-us-free-trade-agreement-impact-on-uk-agriculture

Trade Update

The Office for National Statistics (ONS) recently published UK trade data for January 2021.  Unsurprisingly this has revealed significant drops in food and live animals trade with the EU.  Whilst the 64% drop in exports to the EU captures the headlines, imports from the EU have also dropped by 24%.  However, there are multiple factors at play and it is still too early to tell with accuracy how much trade with the EU will change as a result of Brexit. 

As the chart below also reveals, there was a significant increase in trade with the EU from September 2020 as businesses stockpiled in advance of potentially significant border friction arising from a No Deal Brexit or a bare-bones trade deal.   As it happened, the Trade and Cooperation Agreement (TCA) was comprehensive in the sense that there were no tariffs or quotas on agri-food trade; however, it did not include a veterinary agreement and left exporters to the EU with just one week to prepare for border controls.  With the UK phasing-in controls on imports from the EU as a result of its Border Operating Model, the implementation of which has now been delayed until the year-end / early 2022, it was evident that UK exports to the EU would suffer more in percentage terms than imports.  The January data has borne this out. 

UK Food and Live Animals Trade with EU and Non-EU Countries – January 2010 to January 2021 (£ Million)

Source: ONS

Looking at the HMRC trade data (the source of the ONS figures) in further detail shows that exports of chilled beef to the EU have declined by 59% in January 2021 versus January 2020.  Sheep and goat meat exports to the EU are down by 29%, pig meat exports to the EU are 78% lower, whilst butter and cheese exports are down by 67% and 61% respectively versus a year earlier.

Whilst the data are of concern, more time is needed before definitive conclusions can be drawn.  Although there is still significant friction on trade and many of the TCA’s so-called ‘teething problems’ are in fact permanent fixtures, the situation has improved since January and traders who are well-organised are getting through the EU border controls. That said, given the complexity of UK-EU supply-chains, high value food products with multiple ingredients are experiencing significant issues, many UK traders are now looking at setting up distribution hubs and some processing facilities in the EU.  This will permit them to send loads to a single destination, thus cutting down the paperwork significantly.  From there, if further processing is needed, it will take place in the EU before moving to its end destination. 

It will be mid-year before a definitive picture will emerge as agri-food trade is often lower during January to March.  Trade should recover somewhat but probably not to the same levels as before.  The significant decline in EU imports also presents opportunities for domestic suppliers to capture a greater proportion of the UK market, particularly in perishable agri-food products.  This will mean that there will be winners as well as losers as a result of the TCA.  That being said, supply-chains need time to adapt and such opportunities cannot be realised overnight. 

Morrisons Net Zero Carbon Commitment

Morrisons has pledged to be the first supermarket to be supplied by net-zero farms.  The supermarket has said it will work with its 3,000 suppliers to help them become zero carbon emitters by 2030.  Waitrose has also committed to be supplied by net zero farms by 2035.  Morrisons expects eggs will be the first products to reach this status and this could be as early as 2022.  Lamb, fruit, vegetables, pork and beef will then follow.

Morrison’s Livestock and Produce Teams will initially work with a small number of their suppliers to create net zero carbon farm ‘models’.  Once these ‘blue prints’ have been established they will be rolled out across all of the retailer’s suppliers to enable all food to be produced in a climate friendly way.  The models will look at reducing carbon through better genetics and low food-mile feed, but also by using renewable energy, low emission housing and using less fuel and fertilisers.  Carbon offsetting will also be modelled through planting trees, hedges, improving soil health, restoring peatland and planting grassland & clover.  The retailer is also looking at how ELM can fit into these models.

In developing the programme, Morrisons has said it will work with universities, vets, farming & countryside organisations and carbon experts.  The retailer will also team up with Harper Adams University to set up the world’s first School of Sustainable Farming to offer training to farmers.

Reducing carbon in primary food production forms a key part of Morrison’s plan to become net zero for emissions, as a entire company, by 2040.

Trade & Agriculture Commission Report

The Trade and Agriculture Commission (TAC), the body set up to advise the Government on future trade deals, has published its ‘final’ report on 2nd March.  However, as the TAC will soon move onto a statutory footing, giving it a greater role in evaluating future Free Trade Agreements (FTAs), we will be hearing more from this body in the future.  This report, therefore, is likely to be the first of several.

The report itself is a well-polished document and sets out how much UK consumers are currently spending on food and drink (£46.60 per person per week in 2018/19), the volume of food consumed by food group, and the origins of food being consumed (55% of food consumed is grown and produced in the UK).  It also outlines the implications of leaving the EU, highlighting the disruption caused to devolved regions from friction on UK-EU and GB to NI trade as well as the changes in regulatory authority from the European Food Safety Agency to UK agencies.  It urges that these issues need to be resolved quickly.

The TAC proposes an overarching vision for UK agri-food which centres on having an ambitious trade policy that ‘contributes to a global farming and food system that is fair and trusted by all its participants, including farmers, businesses and citizens, from source to consumption’.  It also calls for food to be ‘safe, healthy, affordable, produced in a way which does not harm the planet, respects the dignity of animals and provides proper reward for those involved.’

Linked with this, the TAC suggests six guiding principles to develop a value-generating and values-driven UK trade policy. These are;

  • Promote the liberalisation of trade, to positively influence innovation and productivity, and price and choice for consumers
  • Prioritise a thriving domestic agri-food sector supported by complementary domestic and trade policies
  • Ensure that agri-food imports meet relevant UK and international standards on food safety and biosecurity
  • Match tariff-free market access to relevant climate, environment, animal welfare and ethical standards, remedying competition issues arising where permitted imports do not meet relevant UK and international standards
  • Lead change, where needed, to the international framework of rules on trade and relevant standards, to address the global challenges of climate change and environmental degradation
  • Support developing countries in accessing the full benefits of the global trading system.

The guiding principles reveal the balancing act that the UK is trying to achieve by liberalising trade on the one hand but safeguarding standards on the other.  The ambition of matching tariff-free market access over time provided standards can reach relevant UK/international requirements is arguably the most complex.  It suggests some form of ‘nuanced’ tariff system which could potentially add (yet) another layer of bureaucracy to an agri-food sector already struggling to implement the requirements of the UK-EU Trade and Cooperation Agreement (TCA).  Much will depend on how these high-level principles are implemented in practice as they are open to differing interpretations. 

The report sets-out 22 recommendations for the UK Government. These can be grouped into five areas;

  1. Develop a bold, ambitious agri-food trade strategy: aligned to a broader UK Food Strategy that would seek to provide a unifying logic and direction for all UK devolved regions, Government departments and industry stakeholders . It would also strike and appropriate balance between liberalising trade and safeguarding key standards. This is certainly something that the UK should aspire to. However, it is especially challenging given that the interests of UK Devolved regions looks set to diverge further as each implements its own agricultural policy and Northern Ireland remains subject to EU Single Market rules for agri-food goods.
  2. Provide international leadership on key issues such as climate change: the opportunities arising from hosting the G7 summit and COP26 this year should be grasped to show the UK’s leadership credentials not just on climate change but on animal welfare, labour rights, ethical trading and combatting anti-microbial resistance. One of the UK’s key objectives from COP26 should be to develop a more robust methodology to accurate net emissions from each farming sector (i.e. gross emissions less on-farm sequestration). 
  3. Continue to strengthen the UK’s approach to negotiating and scrutinising trade agreements: lessons from the TCA should be applied elsewhere.  Future trade deals need comprehensive impact assessments considering both UK-wide and devolved issues. These should also consider qualitative impacts where quantitative measures are lacking. Presumably, the TAC would play a key role here once its Terms of Reference have been agreed. 
  4. Enhance export promotion, market access and marketing: the TAC highlights the UK’s food ‘offer’ being one of quality, traceability, heritage, safety and high environmental and welfare standards.  It urges that opportunities to grow exports beyond the negotiation of trade agreement need to be embraced energetically by the UK Government.  Arguably, the UK is behind the likes of New Zealand, Netherlands and Ireland in this regard and such initiatives need to be embraced at the highest levels in Government if they are to make an impact in key markets such as China.  The TAC rightly highlights the potential offered by ‘heritage’.  Globally, consumers are increasingly seeking ‘experiences’ and authentic British produce is highly-regarded in many regions.  In this era of Covid-curtailed travel, food is a key means to experience another culture. The strong country associations of iconic products such as Stilton, Welsh lamb and Scotch beef have the potential to be a major source of competitive advantage.
  5. Align trade, aid and climate change policies relating to agri-food: so that these work together to strengthen UK relationships with developing countries over time, to diversify Britain’s food supply, support its food security goals and overseas economic development. Aligning these policies is worthwhile, but arguably this policy alignment should be wider and include domestic agricultural policy which was not given much emphasis by the TAC but is a crucial part of the policy framework.

The key difficulty for the TAC was that it was set-up in July. By then, negotiations with the US, New Zealand and Australia were already underway.  Recently, the TAC Chairman admitted that he had no visibility of how those negotiations are going.  This is a concern because what has already been negotiated with these countries, particularly the US, might contradict what the TAC is recommending.  The true litmus test will be the extent to which the UK Government and Parliament takes on board the TAC’s recommendations when concluding and ratifying FTAs with other countries.  Time will tell as to how much influence the TAC ultimately has in practice.  The report is accessible via:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/969045/Trade-and-Agriculture-Commission-final-report.pdf

SFI Pilot

Details have been published on the Pilot phase of the Sustainable Farming Initiative (SFI).  This gives a first indication of what this component of Environmental Land Management will look like in terms of payment rates and requirements.  However, this is just a stage in the development of the scheme and the final details may well alter.

Defra is looking for ‘several hundred’ farmers to take part in this Pilot phase.  The window to submit an Expression of Interest opened on 15th March and closes on 11th April.  Defra will select farms so that they get a representative sample across English agriculture.  Those selected will be notified by 24th May and will be asked to make a formal application from that date, with agreements set to begin in October.  Pilots are expected to run until 2024.  Details of how to register an Expression of Interest can be found via – https://www.gov.uk/government/publications/sustainable-farming-incentive-expression-of-interest.  The EOI is submitted through the Rural Payments system.

Those looking to apply must be currently claiming the BPS and have management control of the land until 2024.  The land to be entered into the Pilot must not be in an existing agri-environmental scheme (i.e. Countryside Stewardship – CS).  The idea seems to be to test the scheme with farmers who are not used to being in a scheme.  It also means there is no overlap with existing CS provisions.  It is intended that, when the SFI is launched in 2022 (see below) it will be available on land in existing CS agreements.   

For the Pilot there will be eight ‘Standards’, each with three ‘Levels’ – Introductory, Intermediate and Advanced.  The payments rise for the higher levels, but a greater level of intervention is expected.  The table below summarises payments and the actions required.  At present, payment levels are based on existing CS calculations.  These may change before the SFI 2022 is launched.  Payments will be monthly in arrears.  It remains to be seen whether this will be carried-over into the ‘proper’ SFI. 

 

It is possible to have more than one Standard operating on the same parcel of land (e.g. the Grassland Standard and the Grassland Soils Standard).  Different Levels can be chosen for different Standards – i.e. it is possible to enter as Introductory in one, whilst going for Advanced in another.  Other Standards are likely to be introduced in future – Peat soils, Unenclosed uplands (i.e. Moorland), Common land and Animal Health & Welfare.

Those looking at the actions in the table will see that there is still a degree of uncertainty on what is required.  Many of the prescriptions are currently vague e.g. ‘provide resources for birds and insects’, without giving details of what exactly needs to be provided and in what quantities.

Those entering the Pilot will be expected to provide Defra with information about how the scheme works.  It is estimated that this might take 10-15 hours per month.  There will be an expectation that a Land Management Plan will be drawn up over the lifetime of the agreement and that participants will take part in workshops, interviews surveys etc.  There will be additional payments (not yet disclosed) on top of the Standards payments to compensate for this.  There are also likely to be Capital payments under the scheme.  Although not stated, it seems likely that these will be similar to those seen under the present CS Capital Grants Scheme.  

What is learnt from the Pilots will help design the full Sustainable Farming Incentive scheme.  More information on the SFI2022 is promised for summer 2021.  It should open for applications in ‘mid 2022’.

For more details see – https://www.gov.uk/government/publications/sustainable-farming-incentive-scheme-pilot-launch-overview/sustainable-farming-incentive-defras-plans-for-piloting-and-launching-the-scheme

 

Budget 2021

The Chancellor, Rishi Sunak, announced the latest Budget on the 3rd March.  This included continued support for the economy to cope with the effects of the Covid-19 pandemic whilst making the first, tentative, steps towards rebuilding the public finances and starting the mammoth task of paying back the debt built up over the last 12 months.

The economic outlook is set to improve later this year as lockdown measures are gradually unwound.  The UK economy is forecast to have shrunk by 9.9% in 2020 – the largest contraction for 300 years.  The latest forecast from the Office of Budget Responsibility (OBR) indicates that the economy will rebound with 4% growth in 2021 followed by an increase of 7.5% the year after.  The  economic support provided during the Covid outbreak has generated wartime-like levels of deficits.  The UK is set to borrow £355bn in the 2020/21 financial year.  Even in 2021/22 it is forecast that £234bn will be added to the national debt – equivalent to 10% of the UK’s GDP.  It will take years if not decades for the country to pay this back.  All parts of the economy, including agriculture, will be expected to play their part in this and there may be tougher fiscal times ahead.  Indeed, as it is seen as a relatively ‘wealthy’ industry, farming may see a bigger squeeze that others. 

Some key announcements as they affect the farming industry are set out below;

  • The headline tax announcement was an increase in the rate of Corporation Tax from the current 19% to 25% – but only in April 2023.  The Chancellor is unwilling to raise taxes too fast, too soon, in case it chokes-off any economic recovery.  This increase is only for larger businesses with profits of over £250,000.  A Small Companies rate (which was abolished some years ago) will return, with profits up to £50,000 continuing to be taxed at 19%.  There will be a taper between £50,000 and £250,000.  Most farming businesses are still Sole Traders or Partnerships so this measure will not affect them.  However, those farming businesses which have incorporated tend to be the larger ones, so they may get hit by the higher rates.  
  • A new ‘Super Deduction’ Capital Allowance is to be introduced.  This will provide tax relief at 130% for any qualifying investment in plant and machinery for two years from 1st April 2021 to 31st March 2023.  The rate is normally 18%  This is effectively paying firms to invest and the idea is to stop firms hoarding cash which happened after the Financial Crisis and slowed the economic recovery.  This allowance is only open to incorporated firms however, which makes it far less useful in farming.  Lobbying is taking place to reverse this issue.  The ‘normal’ first year 100% Capital Allowances that are open to all types of business will remain at £1m for 2021/22.
  • Under Income Tax, the Personal Allowance and the Higher Rate Threshold will be increased to £12,570 and £50,270 respectively for the 2021/22 tax year.  These rates will then be frozen until 2026.  This is effectively a ‘stealth’ tax rise as, over time, the real-terms value of the thresholds is gradually eroded. 
  • The Nil Rate Band for Inheritance Tax will be frozen at the current £325,000 until 2026 (the Residence nil rate band will also remain fixed).  Similarly, the Annual Exemption for Capital Gains Tax is to be frozen at £12,300 until 2026.
  • Duties on alcohol, tobacco and fuel are unchanged for 2021/22.
  • The National Living Wage will rise 2.2% from £8.72 per hour to £8.91 on the 1st April 2021.  This above-inflation increase is an unwelcome extra cost for those parts of farming and horticulture that employ significant quantities of labour.  
  • Furlough (the Coronavirus Job Retention Scheme  – CJRS) whereby employees receive 80% of their usual salary will be extended to September.  Employers will have to contribute 10% of wages in July and 20% in August and September.  The Self-Employment Income Support Scheme (SEISS) will be extended for two more ’rounds’, also taking it through to the end of September.  The criteria will change which will open the scheme to the recently self-employed.
  • Bounce-back loans are to be replaced with a new Recovery Loan Scheme.
  • The waiver of Stamp Duty Land Tax (SDLT) in England and NI on properties below £500,000 with be extended to 30th June.  The threshold will then drop to £250,000 until 30th September before reverting to its usual level of £125,000.  There will also be Government support to promote 95% mortgages.
  • Retail, hospitality and leisure businesses (which will include some farm diversifications) will continue to have full Business Rates relief until the end of June.  Then two-thirds relief will be available through to 31st March 2022 – subject to limits for larger businesses.  There will be re-opening grants for leisure and retail businesses.  Also, the 5% VAT rate for hospitality will continue until 30th September and then 12.5% through until March 2022.

Farm Business Grant – Wales

The Farm Business Grant opened in Wales on 1st March.  This is the 8th Expression of Interest for the scheme which pays up to 40% towards the cost of specific capital items which have been pre-identified to improve the economic and environmental performance of the business.  Applications are made via RPW Online.  The deadline for EoI is 9th April 2021.

Further information is available via: https://gov.wales/farm-business-grant-rules-booklets

Welsh BPS

Applications

The 2021 Single Application Form (SAF) is available to complete via RPW online from 1st March in Wales.  The deadline for submission, without penalties, is 17th May this year as 15th falls on a weekend.  Applications can be submitted up to 11th June, but will attract penalties for each working day late.

Payments

The Welsh Assembly has announced it intends to make a BPS advance payment from 15th October.  This will be 70% of the anticipated final BPS 2021 claim value.  There will be no separate application for this.  Balance payments will be made from 15th December.

UK-EU TCA Implementation

The UK-EU Trade and Cooperation Agreement (TCA) is continuing to experience ‘teething problems’.  This is perhaps hardly surprising as the agreement (click here for summary) was only agreed on Christmas Eve, with implementation beginning just over a week later.  From an agri-food perspective, these difficulties primarily relate to the Northern Ireland (NI) Protocol and Sanitary and Phytosanitary (SPS) issues which are examined below. Rules of Origin have also caused upheaval, but this issue was examined in a previous article (click here).

NI Protocol

Goods shipped from GB to NI are now subject to EU customs and regulatory controls upon entry into Northern Irish ports (e.g. Belfast and Larne).  It was obvious that difficulties would emerge both in terms of logistics but also from a political perspective.  Although some grace periods are in place, varying from 3 to 12 months, many businesses were unprepared for the new regulatory requirements.  There were numerous reports of GB-based firms being simply unaware of the new customs and SPS requirements.  This caused substantial delays in some cases.  Given the difficulties which have arisen, there was a meeting on 18th February of the Joint Committee overseeing the implementation of the Protocol and NI business groups.  The UK Government was represented by Michael Gove whilst the EU Commission was represented by its Vice President, Maros Sefcovic.  NI business groups called for pragmatism and are seeking the following;

    • Grace period extensions: to permit traders to have a longer timeframe to adapt to the changes set out in the Protocol.  This, they claim, would help to reduce pressure on supply-chains and give greater certainty to businesses that trade between GB and NI.  
    • Veterinary agreement: between the UK and the EU to reflect the low risk involved as both parties’ standards are effectively the same, particularly on trade from GB to end-users in NI.

The veterinary agreement issue is examined in further detail below.  It remains to be seen what the UK and the EU will be able to agree on the NI Protocol.  Michael Gove had already called for a grace period extension until 2o23.  The recent appointment of David Frost (previously Chief Brexit Negotiator) to the Cabinet to oversee UK-EU relations, a role which will also cover the NI Protocol, will add an uncertain dynamic as the Gove-Sefcovic working relationship had functioned quite well.  It remains to be seen what the EU will offer, but it is obvious that businesses need significantly more time to adapt and that rising political tensions need to be quelled.

Sanitary and Phytosanitary Issues

There were minimal easements in the SPS area within the TCA.  This, in addition to the EU implementing its border controls fully from January, meant that UK exporters were suddenly faced with a substantial increase in paperwork with only a few days’ notice.  Some have reacted by limiting the number of consignments being shipped to the EU until they get a greater understanding of how the procedures work.  There have been reports of hauliers being unwilling to depart warehouses, processing plants etc. until the paperwork for each shipment is in order.  As a result, port traffic volumes are lower than normal.  Holyhead-Dublin volumes are at 50% of normal levels.  Dover-Calais volumes are also down, but some recent evidence suggests they have been recovering in comparison with the drops witnessed in January.  As freight volumes increase during the spring, as is traditionally the case, border control systems are going to be tested.  Especially as additional certification and checks will be required on imports into the UK from April and will become fully operational in July.

Already there is evidence of insufficient veterinary capacity at ports. This creates backlogs for shipments needing to undergo physical checks.  These are effectively the same as the levels of checks that countries trading with the EU on WTO MFN terms experience.  Such checks, when coupled with sampling in some instances, can result in significant delays and create a major risk of product value deterioration.

To address this issue and the difficulties arising from the NI Protocol, the prospect of a UK-EU SPS (veterinary) agreement has been mooted. Here, there are two potential options:

  1.  ‘Swiss-style’ SPS agreement: where the UK would align with, and follow, the EU’s standards as they evolve in future.  The Ulster Farmers’ Union (UFU) has stated that it would support such an arrangement. 
  2. New Zealand-style agreement: where physical checks on red meat shipments for instance will be lowered from 15% to 1% to reflect the low risk levels and high alignment in standards.

The EU has stated that a veterinary agreement is ‘on the table’, however, they would envisage this being based on alignment with EU standards (i.e. Swiss-style).  Given the importance that the UK placed on sovereignty during the negotiations, it is unlikely to opt for this approach, particularly with David Frost at the helm.  However, a New Zealand-style agreement might be viewed more favourably.  Whilst this will not obviate the need for some border controls, particularly on GB-NI trade, if these could be moved in-land for ‘authorised (trusted) traders’, it would reduce the visibility of such regulatory checks to a significant degree. 

Whatever form a potential veterinary agreement between the UK and the EU would eventually take, the UK will insist on having the right to diverge in the future, if it so wishes (e.g. to do a trade deal with the US).  In such a scenario, the UK would give a notice period (e.g. the EU-NZ agreement has a 6-month notice period) and it would then be likely that SPS controls would revert back to the current default, with some additional arrangements under the NI Protocol.

What is increasingly clear is that the UK-EU relationship will be continually subject to negotiations.  In effect, the ‘teething problems’ are more like a permanent toothache and will require constant attention to keep their impact to ‘manageable’ levels.  The appointment of David Frost to the Cabinet confirms this.  Therefore, one should not see the ending of the Transition Period in January as the ‘end of Brexit’, perhaps it is more like the ‘end of the beginning’ of the new era of UK-EU relations.