Economic assessment of the impacts of post-Brexit trade and policies on Scottish farms

This report presents an analysis on impacts of post-Brexit trade and domestic policy scenarios on eight different Scottish farming systems. A farm level model, ScotFarm and a microsimulation model, ScotMS are used to simulate the impacts at a farm level and at an aggregated national level respectively. The analysis is conducted under the post-Brexit free trade agreement between the UK and the EU and four alternative domestic policy scenarios (two different levels of removal of farm direct payments and two production impact assumptions under such farm direct payment removals). The price parameters under all scenarios used in this modelling work were taken from the AFBI Post-Brexit report. The models estimates that the free trade agreement have a very small impact on farm net profit for all Scottish farming systems. The production level on farms in each of the farming systems are also shown to have a negligible impact under this trade scenario. However, all farming systems are projected to be negatively affected by the removal of farm direct payment. The beef and sheep farming systems are the most affected farms suggesting their higher dependency on farm direct payment. Many of these farms become loss making farms when farm payments are removed. For instance, around one third of the farms in the specialist beef farming system go from being profitable to loss making farms when 50% of the farm direct payments are removed from the farms. The consequences of removal of direct payment on Scottish farms can also be observed on the changes in farm production levels. Farms in all farming systems are estimated to reduce production to different extent when farm direct payments are removed with the highest production reductions (> 10%) on farms within the lowland beef and mixed farming systems (Figure iii). Farms in these two farming system are also projected to have higher share of farms exiting farm production.