A British exit from the European Union would have a devastating effect on the nation’s farmers, leaving only the most efficient 10% able to survive without the multi-billion pound subsidies currently handed out by Brussels, says a new report.

The study, titled Preparing for Brexit by the independent London-based analysts Agra Europe – who track EU and UK policy, also warns that leaving the EU could damage UK food exports, cause large multinational food companies to relocate away from the UK, and choke off the supply of much-needed seasonal labour from eastern Europe.

The report comes as David Cameron steps up efforts to renegotiate the terms of UK membership ahead of an in/out referendum, held before the end of 2017. The prime minister will write to Donald Tusk next month, the president of the European council who chairs EU summits, detailing the changes he hopes to secure.

So far the future of UK agriculture has not featured prominently in the renegotiation debate, although senior figures in the National Farmers’ Union (NFU) have raised concerns about subsidy loss and pointed out leaving the EU could make it more difficult to recruit overseas workers from member states such as Romania and Bulgaria.

Agra Europe points out that Brexit would “instantly disqualify” UK farmers from all EU subsidies, which currently account, on average, for 35-50% of their gross incomes. Based on analysis of UK government policy papers to date, it says that a replacement regime likely to be put in place for them by a UK government, post-Brexit, would mean their total support would drop from between £3.5bn and £4bn a year at present, to more like £1bn a year.

The report says that without EU support, most UK farmers would be caught in downward spiral of collapsing incomes and declining asset values.

“For a majority of farms, [EU subsidies] represent the difference between profit and loss. Only the super-efficient, top 10% could survive without them.

“The survival would be made more difficult by the decline in their asset value, since the removal of the land-linked EU subsidy would be expected to reduce land values and thus the creditworthiness of many marginal farms,” it adds.

It also warns that Brexit would make it more difficult for the agricultural food industry to trade with the EU. UK agriculture, it argues, “is much more dependent on EU markets than the EU is on the UK”. In the event of Brexit, UK farmers “would be mainly dependent for their returns from a less-than-certain world market and would be much less protected from lower priced imports.”

Eurosceptics often advocate the ‘Norway approach’ as a workable alternative to EU membership – whereby the UK would remain a member of the European Economic Area in addition to separately negotiated deals. However, Agra Europe says that this approach “would be positively disadvantageous” for the food and agriculture sector. The UK would only have access to the EU market if it complied with a host of EU regulations which British officials would have no role in shaping.

Chris Horseman editorial director of Informa Agribusiness & Commodities said that since the UK was a crucial export market for Ireland and the Netherlands, the EU would have an incentive to negotiate a free-trade deal with the UK. However, he pointed out that “this could take years to finalise, leading to uncertainty, and possibly triggering disinvestment in the UK by multinationals.” Another possible ramification of Brexit could be job losses in the wider food industry.

Brexit may also further stoke national tensions within the UK, as Scotland, whose farmers receive a higher slice of the subsidy cake, would disproportionately lose out. The report notes that “Brussels is more sympathetic and more willing than Whitehall to finance policies which are of more concern to the regions. Horseman warned of Brexit being “a possible flashpoint if the UK voted to leave the EU while the majority of Scots voted to stay in. Scotland may well then call a second referendum to consider quitting the UK in order to stay in the EU.”

A government spokesperson said: “This government is focused on delivering its commitment to renegotiate Britain’s relationship with the EU and give the British people the final say on whether to remain in a reformed EU in an in/out referendum before the end of 2017.”