Effect of the UK leaving the EU on the rural economy

This briefing provides an overview of some of the issues that may arise in a debate on the rural economy.

Rural businesses accounted for 25% of all businesses in England in 2014/15 and 30% of those in Scotland in 2016 (note that England and Scotland use different definitions of rural areas); 16% of those in England and 28% of those in Scotland were based on agriculture, forestry and fishing. Tourism is also an important industry for the rural economy.

EU funding through the Common Agricultural Policy (CAP) is highly relevant to the rural economy. Making up nearly 40% of total EU expenditure, it provides direct payments to farmers, market support measures and rural development programmes to support the wider rural economy. Direct support for the UK has been guaranteed by the Government to 2020 but a new agricultural policy for the UK is expected in the future.

In the year to September 2016, 72% of UK food and non-alcoholic drink exports were to the EU; the UK imports more food and drink than it exports and the EU is a major source. At the current time we do not know what trading arrangement the UK will have with the EU and what farming policy will replace the Common Agricultural Policy. Both are linked – any agricultural subsidies would be highly relevant in the making of alternative trading arrangements.

Some of the agricultural and environmental impacts of Brexit were picked up by the Environmental Audit Committee’s recent report The Future of the Natural Environment after the EU Referendum.