Get strapped in for bumpy ride ahead
With Brexit apparently around the corner but out of control and farm and environmental payments under threat, farmers could be in for a bumpy ride over the next few years.
The effects on agriculture, as yet unknown, are just as likely to be positive as negative but there are steps to take to mitigate the risk short term to ensure farming businesses can survive the journey in the longer term.
In the first instance, look at the structure of the financial accounts and identify where the weaknesses are and the potential savings.
Lending rates for the sector are very competitive at the moment so it may be worthwhile refinancing debts to get a better deal. If you are using an overdraft facility consider putting some of it into a longer-term fixed rate loan so that you know what the cost will be. The last thing anyone needs is for Bank of England interest rates to go up bringing a sudden increase in bank charges.
Efficiency is key – is the farm running productively and effectively? To future-proof the business it might be necessary to enter into some sort of joint venture, sharing arrangement for labour, machinery or other resources to offset some costs.
Also look at succession, even if it seems a long way off. Is there a succession plan in place on the farm? If not, what will happen to the farm business when you are gone? If there isn’t someone such as a family member lined up to take over, it may be pertinent to consider a contract or share farming arrangement. Be sure to check that the land is registered with the Land Registry to avoid confusion over ownership at a later date.
For land owners, the farm and buildings are major assets which could be eligible for development. Whether that is to capitalise on value or provide expansion or diversification of the business you should take professional advice as every farm and situation is unique.
The government has a 25-year plan for the environment and there are opportunities ahead for farming businesses to benefit from environmental measures and natural capital.
Farmers control the majority of land in the UK and the government is looking to the industry for help to protect resources and mitigate climate change.
How these services are to be measured and valued is not yet known but there is potential for farmers to manage soils and water to protect and improve the environment, increase public access to the countryside, protect plant and wildlife and maintain high livestock health and welfare standards – all this while they continue to produce food to a very high standard.
The message is be aware of everything going on within the industry and keep your eyes on the ball in the field and in the farm office.
Sarah Reece, chartered surveyor and partner with Berrys at Shrewsbury
