The European Community (EC) sheep meat regime, introduced in 1980, was designed to resolve a conflict of interest between British and French sheep producers and originally sought to preserve the status quo, which included widely varying production systems, market prices and policy objectives. Although Britain's sole use of the variable premium focused discontent of other member states on its system of support, its production in the 1980s expanded continuously and its exports increased. However, the EC regime came under further pressure from the accession of Spain in 1986 and the inclusion of goats in the regime in 1985 added to budgetary problems. The cost of the regime has increased greatly and. this fact, together with the move towards a single market by 1992, meant that the fragmented market solution of 1980 could not last.

The agreement of July 1989 on a reform of the regime marked a major change. The transitional phase will see the phasing out of the special national provisions, including variable premium. Lower rates of premium for larger flocks, private storage aid, an EC standard quality and a differentiation between milk and meat producers will come into force in 1990 and 1991. By the end of 1992, a single premium will be applicable throughout the community and a single market will be in force.

This poses both challenges and opportunities for the British industry. Export markets will be more open. The variable premium, both a straight jacket and a safety net, will disappear and demands for price, quality and even supply will be more urgent. Traditional patterns of production will have to prove their efficiency. Options, such as more extensive/‘natural’ production, more intensive production, meat/wool dual production and organic production will need to be considered.