Brexit: Make or Break For Lincolnshire?

Brexit: Make or Break For Lincolnshire?

When it came to giving their opinion on EU membership in the referendum, the population of Lincolnshire were pretty clear. Lincolnshire voted overwhelmingly to leave. In fact, th*e county recorded the highest leave vote in the UK with a whopping 75% voting leave*. The town of Boston recorded the highest individual leave vote with 76% of voters deciding they wanted to end our 43-year membership.

So why did Lincolnshire vote leave in such numbers? Why did towns like Grantham and Boston lead the leave charge? And what does leaving mean for Lincolnshire’s businesses? With the county’s dependence on agriculture, haulage, manufacturing and services sectors – all of which are closely intertwined with Europe and export markets generally, leaving could have a big impact on Lincolnshire’s businesses. In this latest blog from Coversure Grantham – Grantham’s leading provider of business insurance – we’ll look at what leaving means for the local economy and see if Brexit will make or break Lincolnshire.

Why Did Lincolnshire Vote Leave?

There’s little doubt that, as in so many Leave supporting areas, immigration played a role in people’s decision. Migrant workers from eastern European states such as Lithuania, Ukraine and Poland have become a mainstay of the agricultural workforce since 2000. The levels of immigration have been such that Polish is now the second most widely spoken language in the county. In a conservative area such as ours, this hasn’t gone unnoticed.

Then there’s feeling a lack of control. Businesses such as farming and food processing – which contribute 24% to the economy (versus just 13% nationally) – are heavily influenced by EU’ laws. Decisions made in Brussels can have a massive impact on the lives of local producers. For example, the removal of EU’ quotas on sugar beet in 2017 led to an explosion of European plantings, forced the price down and drove many farmers to look for an alternative break crop.

One of the curious things about Lincolnshire’s support in contrast with many other big leave voting areas is that the Lincolnshire economy had grown faster than the national average since 2010. Key sectors like agri-food and manufacturing grew by 30% between 2009-2015, so the adage, ‘It’s the economy, stupid’ doesn’t necessarily apply here. That said living standards and wages are lower than the national average with wages £3,800 below the average at just £24,700 according to the Lincolnshire Enterprise Partnership.

So now that leaving looks like it is finally going to happen, what does it mean for the county’s businesses? To find out we’ll look at this from the perspective of some key Lincolnshire’ business sectors.

Farming

Farmers have had a love-hate relationship with the EU since we joined the E.E.C. back in 1973. On the one hand it has handed down regulations that have restricted farming practices and have placed an increasing burden of environmental responsibility on them. The Common Agricultural Policy has often been viewed as having been devised to support French farmers, and recent bans such as on sugar beet growers being able to use neonicotinoid insecticides have been a major blow to growers and has undoubtedly hurt this already troubled crop.

Farmers have always been happy enough to take EU subsidies though. Data from an Informa Agribusiness Intelligence report in 2018 estimated that on average 60% of farm income comes in the form of EU subsidies. It goes on to say that without subsidies, 90% of farms in the UK would collapse and land prices would crash.

Ask any farmer how business is and the answer will likely be ‘Hard!’. Milk, cereals and root crop prices have been extremely volatile in recent years thanks to global competition and freakish weather conditions. Removal of subsidies will hit farms hard – the smallest hardest – and with the government only pledging to keep them going until 2022, the future looks uncertain.

Then there’s labour. An amazing 99% of seasonal workers come from the EU and businesses have come to depend on them. Take a look at British Sugar’s Newark sugar beet factory: the goods-in entrance has signs in 5 European languages. Such a loss of labour could have serious consequences.

Uncertainty though could lead to a brighter future. Export markets beyond the EU could be opened up and deals with Japan, Australia and even the US are distinct possibilities. It could also be a massive driver of efficiencies – something most agree is long overdue. A move to electric commercial vehicles could reduce costs and make farming a more flexible business. Automation, something that is already creeping in, could reduce the need for labour and with the growing global demand for meat-free diets, an arable centre like Lincolnshire could see a surge in demand.

Haulage

Another huge sector for Lincolnshire, and one that’s obviously closely entwined with the agri-food industries, is haulage. Be it transporting crops, raw materials for the food processing sector, manufactured goods for export or importing supplies, haulage is at the centre of it all. So, what does Brexit mean for trucks and haulage businesses?

If we leave with no-deal then there could be some big problems. Sterling is likely to fall (even further) and that will push the price of diesel ever higher given fuel is traded in dollars. Those involved in importing or exporting are likely to face lengthy delays at ports as checks need to be undertaken owing to the end of free movement of goods. Then there’s the driver shortage. There’s been a long-term shortage of qualified drivers in the UK. The Traffic Commission estimates that there’s a shortage of around 45,000 drivers in the UK, and that figure is rising at a rate of 50 per day. Add in to that the fact that there are 60,000 foreign drivers working for UK haulage firms and that EU national migration hit a decade-high in February 2018 and we could have an even more serious driver shortage.

This obviously isn’t good and any problems would have ramifications county-wide. Contingency plans, so we are told, are in place though. Given the size of the haulage industry – £124bn according to the Road Haulage Association – it seems unlikely that the government will sit back and do nothing. Perhaps the much-vaunted technological solution will work and checks won’t be needed. Automation may also solve the driver shortage and reduce costs. The government has already pledged to make driverless trucks a reality and road tests have started.

If Grimsby can become one of the 10 ‘free ports’ that the government has promised – a port where duties can be delayed – then it could see a huge increase in activity and a surge in demand for hauliers. And if we can strike trade deals beyond the EU then trucking could see the golden age the Brexiteers have promised us.

Manufacturing

Lincolnshire’s manufacturing sector is a significant contributor to the region’s economy. Highly skilled workers at world class engineering and manufacturing companies such as Siemens, RWE and Cummins contribute £1.9bn and employ 41,000 people. Brexit’s impact will depend largely on whether we get a deal. No-deal means loss of access to the free market, tariffs and delays to just in time supply chains, all of which could lead to questions about future investment. Siemens’ CEO has already said that their investment in their wind turbine operations in Hull will be affected by Brexit and a no-deal could make matters worse.

Another issue is a shortage skilled labour. As we’ve noted, EU migration has peaked since the Referendum and this, retirement and falling birth rates could leave Lincolnshire with a big shortfall in skilled workers. According to the Lincolnshire Enterprise Partnership, by 2024 there is a potential gap in the local workforce of 125,000 people.

Again, there could be opportunities in export markets beyond the EU. Sterling’s fall has made UK goods much cheaper and new trade deals could introduce plenty of new markets. Then there’s the research and innovation for which the UK is rightly famed. New technologies and talented people abound and companies are keen to be able to access that.

Ultimately this is a sector that desperately needs an orderly Brexit. Export markets, supplies, talent, all depend on the EU, at least in the short and medium-terms.

Brexit: Make or Break For Lincolnshire?

Loncolnshire’s business future is going to look rather different from its past – ironic as that seems to be what people were voting to recapture. Farming will be freer, but less well-protected financially and, like haulage, it will have to embrace new technologies and working practises. Manufacturing needs to cast its eyes both closer to home and farther afield for markets and talent.

More than most counties, Brexit is going to have a seismic effect on Lincolnshire. The future will be in our hands and so together we can make the future brighter than the past. It won’t be easy, but what worthwhile is…?

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