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Contributions of Agriculture to the UK Economy

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Contributions of Agriculture to the UK Economy

Farming makes a major economic contribution to the UK economy, acting as a key supplier for the agri-food industry and also via direct sales. The impact of Brexit is sure to have vast implications on the role of agriculture in the UK as the Common Agricultural Policy operated by the EU has been the basis of UK agricultural policies since the 1970s.

Impacts of Brexit on UK agriculture

It will be vital for the UK to develop new policies to support agriculture and the rural environment. One reason is that the European market is currently the biggest export destination for the UK's agricultural exports, in addition to being the major source of all food imports. The EU has also negotiated trade agreements on our behalf with partners outside its borders, so it will be critical for the UK to commence negotiations at the earliest opportunity so that access to these non-EU export markets are retained.

Prior to commencing any agricultural trade negotiations, it's important to reach an understanding of the vast contributions farming makes to the UK, which should look at the costs and benefits associated with our agricultural industry, as well as overall returns generated. The National Farmers' Union commissioned a 2017 report on the contribution of agriculture in the UK and its conclusions are highlighted below.

NFU report on the contributions of UK agriculture

The NFU report goes a long way towards identifying and quantifying UK agriculture's contributions to the economy, by way of growing food and also as a major contributor to the UK food and drink sector. The report also assesses the cultural and social contributions made by farming and how the rural environment is managed, as well as an assessment of costs that are associated with agricultural activities.

UK farming meets a huge proportion of the domestic food consumption requirements and contributed almost £24bn of revenues and £8.5bn of Gross Value Added (GVA) to the UK economy in 2015. It also provided around 475,000 direct agricultural jobs and supported an additional 30,000 jobs via supply chains. The importance of agriculture applies throughout the UK, but especially in the East of England, Wales, South West England, Scotland and Northern Ireland.

UK agriculture also has an important role in supplying raw materials for the domestic agri-food industry, which provides an additional £108bn GVA to the economy and employs 3.7m UK workers. The UK’s agri-food industry provides around £18bn of gross export earnings annually, which goes a long way towards counterbalancing UK requirements for food imports.

When it comes to the export of raw or lightly processed agricultural products, some of the important production areas for UK farmers are lamb, mutton, beef and some cereals. The EU is a major destination for UK agricultural exports, with primary markets in the Irish Republic, Germany, France and the Netherlands. Additional major export markets include the United States and the Gulf States.

Added value offered by farmers

Agricultural land amounts to more than 70% of the UK and farmers have responsibilities for maintaining a wide range of landscaping features, including over 370,000 km of hedgerows and 900,000 ha of woodland, alongside a huge variety of ponds and lakes and other landscape features. These landscape assets supply important habitats for native wildlife and contribute to the traditional UK landscapes found across the countryside.

The role of agriculture is also important for protecting against soil erosion, managing the country's water resources and enhancing air quality. Over recent years UK farmers have increased food production while at the same time cutting agricultural impacts upon the environment. DEFRA sources confirm that since the year 2000, greenhouse gases attributed to agricultural sources have been cut by 5.5 million tonnes annually, which is a drop of more than 10%. Use of water and mineral fertilisers annually has also decreased and annual ammonia emissions have dropped significantly. Some of the factors influencing these statistics include:

- gains in efficiency and productivity due to innovations and technological advances by farmers and the agricultural industry supply chain
- the spread of knowledge throughout the industry contributing to best practice farming solutions
- schemes and networks led by industry
- opportunities to participate in agricultural environmental schemes

The UK agricultural sector has also become an important provider of renewable energy, through wind power, solar power and energy produced via biomass. About 10% of total UK electricity generated is now sourced from renewables sited on farmland.

UK farms are also hosting sites for much of the UK's vital infrastructure, including systems for national electricity transmission and mobile phone communications.

The benefits of UK agricultural land for recreational opportunities

The agricultural landscape of the UK provides a variety of recreational opportunities and it's estimated that 3.7 billion visits to the countryside are made by adults in the UK annually. The annual values of these visits are measured by UK adults' willingness to pay proxy values and amounts to more than £19bn.

Organised visits to working farms, outdoor recreational opportunities and programmes such as the Duke of Edinburgh Award Scheme provide additional, vital learning opportunities for the UK's schoolchildren.

The attraction of the UK's countryside assets also plays a major part in securing international visitors and holidaymakers to the UK. It's estimated that around 20% of international visitors to the UK will visit the countryside at some point during their stay. This provides estimated values of a minimum of £2bn annually to the UK's economy.

Total contributions of UK agriculture to the economy

The NFU report concluded that UK agriculture provided a total value of monetisable contributions to the economy of £46.496bn in 2015. While direct payments to farmers for the year amounted to £2,803mn. Additional estimated value of contributions made by agriculture include:

- costs for soil, air and water resources estimated at a value of £2.603bn
- carbon costs estimates for UK agricultural production amounted to £886mn

The total costs associated with agricultural activities, therefore, amounts to £6.292bn for the year 2015, giving a total ratio implication of benefits to costs of:

- benefits totalling £46.696bn
- costs amounting to £6.292bn
- total benefit to cost ratio of 7.4:1.0 in 2015
- meaning the total agricultural contribution to the UK's economy through 2015 was worth 7.4 times the level of support received in direct payments in addition to carbon costs and the external costs for air, soil and water resources.

You can read the full https://www.nfuonline.com/assets/93419 NFU report online to receive more valuable insights into the contributions that UK agriculture makes to the economy. This is the most comprehensive report into the contributions of agriculture, although DEFRA publish regular updates on income from farming, with their latest update of 30 November 2017 highlighting that total income from farming dropped by over 7% for the year 2015-16 to £3,682mn and contributed 0.47% to the national economy. (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/663429/agriaccounts-tiffstatsnotice-30nov17.pdf)

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