EU reform of the sugar sector will substantially cut production and farm incomes from sugar beet in Britain, a report said.

"All scenarios lead to a significant reduction in the income generated from sugar production (excluding compensation)," said the report produced for the farm ministry (Defra) by the University of Cambridge and the Royal Agricultural College.

"With a quota cut all farms, even the most efficient farms, will have to cut back on production," added the report, entitled Economic, Social and Environmental Implications of EU Sugar Regime Reform.

In July, the European Commission proposed an overhaul of EU sugar policy, calling for huge price cuts for a regime barely changed in 35 years.

The Commission presented a proposal that calls for deep cuts in national production quotas and the EU's inflated internal prices, resulting in lower sugar exports.

The plan's envisaged start date for reform is July 2005.

With its array of subsidies and quotas, the system inflates EU sugar prices to more than three times world market levels.

Once EU policy is reformed, European consumers are certain to be paying less for sugar, and a small group of powerful industrial producers will benefit, analysts say.

In July, a British parliamentary committee urged the phasing out of the quota system and price cuts as part of the reform.

The report produced for Defra, which does not necessarily reflect the views of the ministry, said the number of jobs lost in British agriculture will depend on substitution of crops, diversification of incomes and compensation.

It estimated that around 10,000 jobs are currently related to the sugar beet sector, which represents under two per cent of the crops and grass area of England, according to Defra.

The value of output from sugar was £283 million in 2002, representing some two per cent of gross agricultural output.