I congratulate Jenny Chapman on securing this important debate on a day when we have already had a lot of discussion about our EU exit. She has raised this issue in a series of parliamentary questions, and a little later I will address some of the concerns and issues she raises.
The UK sheep sector is incredibly large and important. Combined, our upland and lowland sheep production had an annual production value of around £1.26 billion in 2018, accounting for around 4.5% of all agriculture output in the UK. As a number of hon. Members have said, the sector is also responsible for some of the most iconic landscapes in the UK.
There are 16 million breeding ewes and some 70,000 sheep farms across the UK, and the sector is particularly important in some of the devolved regions. For instance, around 50% of UK sheep production and the national flock is in Wales and Scotland. The UK is the largest producer of sheepmeat in the EU, producing around 38% of all the sheepmeat and goatmeat produced in the EU last year. The UK is also the world’s third largest exporter of sheepmeat, behind New Zealand and Australia, so we are a truly global player in this sector.
Around a third of our annual production of lamb is exported and, as the hon. Member for Darlington said, over 95% of it goes to the European Union. Total lamb exports in 2018 were valued at around £384 million, with a large amount of that coming from the European Union. The main export destination for lamb in 2018 was France, followed by Germany and Belgium, but for certain parts of the industry, notably those in Wales that tend to produce smaller lambs, some of the Mediterranean countries such as Italy and Portugal are also important purchasers of our goods. Some of our heavier lamb, predominantly from lowland areas, is more sought after in northern Europe. We recognise that, because of all those factors, in the event of a no-deal exit the sheep sector is the most exposed in its trading relationship with the EU, and we have always acknowledged that.
In managing those risks, we have two important factors going for us. First, we have a large domestic market for food in general and for lamb in particular. Measured by import value, the UK is the world’s third largest market for food and drink, coming after only China and Japan. That means there are many opportunities for import substitution, as we currently source a significant quantity of lamb from New Zealand.
Secondly, we have an independent exchange rate—an independent currency and a floating exchange rate. That is incredibly important for the agriculture sector. It helps as an automatic stabiliser when we have shocks. We now contemplate the prospect of having to leave the EU without a withdrawal agreement, although that is not our preference, as all hon. Members know. Having a floating exchange rate makes that easier for the farming sector than it would have been had we become trapped in the euro some years ago.