Potential Impacts of Changes in Single Farm Payment (SFP) on Rural Economy in Northern Ireland (NI)

Agricultural support in particularly single farm payment (SFP) in the Common Agricultural Policy has encountered more and more challenges. In this study, we have used two hypothetical policy impact scenarios, a SAM multiplier analysis and a static CGE model to mimic the knock-on impacts in the short term, and equilibrium impacts in the long term, of removing the single farm payment on the agri-food sector, rural and overall economy in NI. In the two policy impact scenarios, the production effects of the single farm payment is assumed to be under two extreme cases: either a pure government income transfer to rural households (Income Transfer Scenario) or SFP is still fully coupled to agricultural production (Fully Coupled Scenario), respectively. Counterfactual analysis suggests that In NI removing SFP is likely to have limited impact on overall economy but it will improve the overall economic efficiency due to resource reallocation and savings from the exit of marginal agricultural production / farmers. For agri-food sector and rural economy, a strong effect will be felt in the short term and the effect will be diminishing via supply chain and in the long term the impact will be modest.