4 minute read
Brexit and bloodstock
Adam Potts has bravely (and from a non-political standpoint) attempted to summarise Brexit and give an us idea of its effects on the bloodstock world.
We hope his piece will provide you with a helpful overview and a timeline for Brexit, but as the politics surrounding the UK’s departure from Europe are changing rapidly and the whole process so muddled, Adam’s article could well be superseded by events by the time you read it...
Just before day two of the Tattersalls Ireland Derby Sale in 2016, Britain voted 52-48 to leave the European Union.
As is the case with any organisation, when it becomes too big, it becomes harder to have an affinity with it — causing rise for a “back to the nation” standpoint.
In fact, one could argue that the EU is not even operating as a union, but as several different alliances.
We’re seeing that the EU being “too big to fail” is not so, and it may be at a scale so big that it is bound to fail.
But, given that Britain is in a period of stagnating real wage growth (wage growth adjusted for inflation — a general increase in prices), the weakest of any G7 nation over the past decade, the timing of such a drastic move is open to doubt.
The vote was of such high importance because it was a fundamental change to the constitutional arrangements of Britain. Yet, if a country is to be judged by its google searches, it seems many British voters began to think seriously and question Brexit only after the polls had closed.
The second-most searched EU-based question on results day was: “What is the EU?”, and as the cabinet currently debates the Brexit plan, searches for Love Island are currently ten times higher than that for Brexit.
However, the thoroughbred industry can not be uninterested.
First, on a broad level, economic performance is the primary influence on racehorse ownership.
This was the vote of the undefined for the uninformed, and evidently, much of the population are now plainly uninterested.
The weakened sterling has meant euro purchases are more expensive for those trading in sterling. Talks are slow, and the longer the uncertainty overhangs, the less confidence firms will have, adversely affecting their operations, which could further weaken the sterling.
Should this occur, sterling buyers could decrease buying activity abroad. The weakened sterling has already led to a decline in Irish stud fees to maintain competitiveness for English breeders.
On the other hand, European buyers may wish to capitalise on the strengthening of the euro, but this can only occur should the continuation of the free movement of thoroughbreds between Britain, Ireland and France still exist.
Lengthy border veterinary checks would deter travel and would be most inefficient for both the racing and breeding industry. There are around 26,000 thoroughbred movements between Britain, Ireland and France each year.
Nearly all of Ireland-France journeys are made via Britain, with the Ireland-France direct route taking almost a day to complete.
Greater checks would deter French broodmares from visiting Irish stallions, and vice-versa. Thankfully, it seems progress is being made in discussions with the European Commission, and it is expected that the tripartite agreement of free movement between these three countries (which was formed before the formation of the European Union), can continue during the transition.
As this can not be a permanent solution, it is important going forward that the aim of creating a new “high health horse” category for thoroughbreds is achieved when a new EU legal framework for animal health takes effect in April 2021.
The introduction of a 30-day foal notification to Weatherbys improves traceability from the very beginning of a horse’s life, and can only strengthen the case for implementing such a new category that holds the thoroughbred in a higher echelon, allowing for more seamless travel.
The loss of access to the single market would create barriers to trade and increase the administrative load on UK companies. Companies faced with large tariffs are disincentivised to trade, threatening the UK operations of such corporations.
Gains from trade allow for wealth creation, stemming from economic network chains. No access to the single market will shorten these network chains, and in theory, limit a company’s ability to maximise profit.
Hard Brexiters will, however, argue that planning to keep the UK close to the single market will force the UK to give further concessions to Brussels at the negotiating stage, worsening the deal.
Either way, it is a form of de-globalisation, as any EU restrictions will unlikely be instantly compensated by countries operating on a similar trading scale. Recreational racehorse owners are, from a consumer perspective, owners of luxury goods. These items tend to be the first to go when someone’s income decreases.
Poor economic performance will hinder income.
Theresa May’s early July meeting at Chequers, the Prime Minister’s country residence, suggested a new aim for a soft Brexit, backed (originally) by the cabinet, albeit with a fair degree of ambiguity.
The cabinet will push ahead for a “facilitated customs arrangement” compromise, which would allow Britain to operate its own trade policy but simultaneously seek to operate within a “combined customs territory”, wishing for harmony with EU rules on goods.
This, of course, has angered hard Brexiters, whose rebellion against May’s plan intensified with the resignations of David Davis and Boris Johnson. The UK is a powerful country, but populated with 60 million people; the EU has 500 million people.
Does Britain really, in the words of Michael Gove, “hold all the cards” and have strong claims of negotiating with the EU a “best of both worlds” situation?
The current speed of progress suggests not, and there is domestic turmoil to be sorted out before the country can be in a position to effectively negotiate.
Further, a hardened stance on immigration will affect the level of migrant workers. Given that British racing has a substantial number of workers from the European Economic Area at EEA countries and non-EEA countries, leaving the EU could inflame the current staff shortage, especially as the Migration Advisory Committee no longer regards work riders and grooms as skilled workers.
Someone off the street cannot suddenly begin riding racehorses, and so this needs to be reversed. Riding and caring for racehorses requires a particular ability — a skill.
With the current divide, one must ask whether Brexit will even occur. Betting markets imply a 25 per cent chance that there will be another EU Referendum before 2020, with a 45 per cent chance that Britain does not leave the EU at its scheduled time of March 29, 2019.
Should this occur, the Brexit stoppers could have a strong case to put forward. The demographics will have changed after nearly three years of fruitless negotiations, and it may then be time for us all to weigh up whether the best possible deal is worthwhile and vote again.
