Category Archive: Political

Bill of Change, what’s to come for UK farmers

For the first time in my life, the UK is not a member of the European Union. As a result, on 15th January 2020 the Government published the second iteration of the Agricultural Bill. In summary the Agricultural Bill sets out a framework of new Agricultural Policies and transition measures for England, Wales and Northern Ireland. The Bill is a crucial cornerstone of the Governments’ future farming and land management policy.

Practically, what does this mean for farmers and land owners?

The Bill clearly sets out that direct subsidy payments (BPS) will be phased out between 2021 to 2027. This means that the current application window to the Basic Payment Scheme will be the last under the current subsidy scheme as we know it. In 2021 reductions in payments will begin. Although there is nothing specifically set out in The Bill, a DEFRA policy statement released in September 2019 clearly sets out the payment bandings and percentage reductions, these operating in a similar way to Income Tax with the reductions only applying to the claim amount within that band. It is likely that further reduction percentages will increase over the transition period until the final payments are made in 2027 scheme year.

Unfortunately, as we know many farming businesses, since the early 90’s, have based their business models on the receipt of IACS, SPS and more recently BPS. To put this into some sort of perspective, according to the FARM BUSINESS SERVICE DATA 2018-2019 the average English cereal farmer relies on BPS income for 58% of their Profit. Within the same survey a less favoured area, grazing livestock farmer relies on 186% of its profit from BPS income, this is a startling figure and would mean the average LFA livestock farmer would be making a significant loss when the BPS payment is phased out in 2027.

The Bill also sets out that it could be possible to roll up a number of future BPS payments and these could be taken as a lump sum. It is clear that the Governments’ intention with this is to assist farmers to either retire, diversify, improve efficiencies or to make it easier for new entrants into the industry.

De-linking is a significant change, payments will be continued to be made to current recipients of BPS, however in the future it is understood that these recipients would no longer have to be actively farming. As I understand it this, coupled with the ability to “roll up” BPS payments, is to accelerate change within the industry and to help free up land and farms that could help existing farmers or new entrants into the industry.

What is the focus of the Bill?

It is understood that there will be new financial assistance powers which will enable payments to be made to farmers for a range of public goods. These payments will be made for such items as providing habitats for wildlife, reducing flood risk, preventing climate change, improving public access and protecting iconic features. In England the Government is in the process of developing the Environmental Land Management Scheme (ELMS), this will be part of the delivery mechanism, working towards the provision of public goods. This scheme is being piloted in a number of areas at the moment and is hoped to be rolled out in 2024, half way through the Agricultural Transition period. If farmers were thinking that this was going to replace the direct subsidy scheme I would suggest that this is not going to be the case at all. The ELMS scheme will be very targeted in what it delivers and I’m assuming will be no-where near the level of financial rewards that current CSS/HLS/BPS schemes deliver to regional farming businesses.

In short the profitability of farming businesses are going to be reduced over the next 7 years. It is important for farmers to understand the impact of what is on the horizon, we have time ahead of us to improve the performance of farming businesses and decrease their reliance on subsidy and in preparation for this we are holding a series of regional talks over the coming months to discuss the Agricultural Bill in more detail and its potential effects on family farming succession.

We are hosting a series of regional seminars which will include discussion on the Agricultural Bill which will run between 24th February and 4th March, for more details visit www.georgefwhite.co.uk/planning-for-change or call your regional office.

Simon Britton, Partner – Head of Farm at George F. White 07866 721146 / simonbritton@georgefwhite.co.uk

Calling Landowners – are you prepared for the ‘Infrastructure Revolution?’

With imminent budget announcements looming – and promises to revitalise the infrastructure of the UK – land owners and businesses need to be aware of if and how these projects will affect the value of their land.

Could it be an opportunity?

With an impressive investment of £100bn proposed for infrastructure plans across the UK, with a real focus on development in the North of England to shake up the north/south divide, there has never been such a crucial time for landowners to understand their rights.

Embrace change.

The UK has been guilty of underinvestment in its infrastructure network – particularly in the North. As a region we should be embracing the welcome investment that will help transform the northern economy, moving away from our industrial heritage into a more connected and productive community to ensure economic growth.

But be prepared – and seek expert advice.

With infrastructure schemes on the horizon it is important you know how this could affect your land and business and consider not only how to ensure appropriate compensation but also that opportunities are taken.

Engaging in expert advice from the very outset will be vital in helping to ensure you secure the best deal.

As specialists in agricultural, residential, commercial and development land, George F. White have been advising clients for over 40 years. We are experts in providing advice on infrastructure changes from the proposal of road and rail transport links through to broadband and technological advances.

We understand that some schemes can be very difficult for landowners and businesses especially where homes are taken and lost. We never underestimate the personal impact and although compensation can help for some cases it is not always enough. The right advice will help you to understand what problems will occur and help reduce the impact.

When it comes to Compulsory Purchase Orders (CPO), it is essential to seek advice from an experienced and qualified professional, such as a chartered surveyor or solicitor, who will be able to advise on your rights as a landowner and act on your behalf in your best interests.

Next Steps

To find out more contact me or join us at one of our upcoming ‘Planning For Change’ seminars in Tynedale, Penrith, Malton, Wetherby, Alnwick or Scotch Corner, visit www.georgefwhite.co.uk/planning-for-change for full details or to register your place.

Robyn Peat – 07860 487038 / robynpeat@georgefwhite.co.uk

Is your business profitable without Farm subsidies?

Whatever your political persuasion, on Thursday 12th December, the country spoke and it is now clear that the UK will be leaving the European Union on 31st January 2020. It is envisaged that the Withdrawal Agreement Bill will now go through Parliament before Christmas. The UK will now have the task of negotiating a post-Brexit trade deal with the EU by the end of 2020.

Without a doubt, the agricultural industry is about to see the biggest policy revolution in a generation, farmers must ask themselves, is their business currently in a position to remain successful, and ultimately profitable without support from agricultural subsidies. The UK Agricultural Bill proposes that direct subsidy payments, after a two-year transition period, will be phased out over a seven-year period, the biggest reduction happening in the first year.

What does this actually mean for farmers in England? To put this into some sort of perspective, according to the Farm Business Survey Data 2017/18, the average English farmer relies on BPS income for 66% of their profit.

We can see from the statistics above that the majority of farms are hugely reliant on subsidies but we at George F. White believe that with careful business planning and adopting the right strategy, the impact of the removal of agricultural support payments can be reduced. Farmers must have a sound understanding of their businesses, focus on management practices that will help them become a top performer in their sector. Farmers must review their business performance as soon as possible to ensure that they continue to be profitable and ultimately successful.

Unfortunately, we are seeing many farmers “burying their heads in the sand” and not having any real understanding as to how their business are performing and indeed if they are cash positive. Over the last three years we have been working very closely with our clients in order to prepare their businesses for the removal of direct agricultural support payments. Assessing the options for the future is crucially important, the earlier you start planning the better the outcome will be. Regular preparation of budgets, benchmarking businesses annually and comparing key performance indicators at every opportunity is what all businesses should be doing. Assessing and utilising the key assets of the business, including its people, will be extremely important. Furthermore, exploring potential new income streams, improving efficiency, investigating possible diversification opportunities and making the most of Grant opportunities as and when they arrive. It is the time for farmers to stop being just farmers and to become businessmen.

What have we been focusing on with Clients? We have been focusing on improving their performance and ultimately removing their reliance on farm subsidy as a provider of profit. The key areas have been cost control, preparation of budgets, benchmarking, attention to detail, innovation and staff engagement.

We have worked hard on the concept of the aggregation of marginal gains. The changing of 100 thingsby 1% not 1 thing by 100%. As an example, if the average English farmer changed their output by 1% and removed 1% from their overheads the marginal gain in uplift in profit would be approximately 9%.

It is important for farmers to understand the impact of what is on the horizon, we have plenty of time ahead of us to improve the performance of farming businesses and decrease their reliance on subsidy, but they must start now, do not delay!

To discuss the impact of subsidy removal on your rural business contact Simon Britton on 07866 721146 or simonbritton@georgefwhite.co.uk

Michael Gove: The Agricultural Bill… a ‘smooth and gradual’ transition?

Today, Michael Gove revealed the government’s proposal for the future of agricultural support payments; whilst further detail is eagerly awaited it is clear a number of changes lie ahead.

Gove

The Agriculture Bill sets out how farmers and land managers will, in future, be paid for ‘public goods’, such as better air and water quality, improved soil health, higher animal welfare standards, public access to the countryside and measures to reduce flooding.

Mr Gove made it clear that he wants a ‘smooth and gradual’ transition to allow farmers to adapt to the new payment regime and therefore is suggesting a seven-year transition period, effectively starting in 2021; he confirmed that the 2019 payments will be based on the current system, but would be simplified if possible. He also indicated that the 2020 payments would be on a similar basis, allowing farmers to utilise the next two years to appraise their businesses and make sure they make use of the certainty the next two years offer. This may include, through examination of each enterprise and its performance, a review of debt and financial arrangements, and also a review of the business structure and planning for future generations. We have already begun this exercise with some of our clients and are finding that if you remove direct payments and rely on business performance some work is needed to ensure maximum performance can be obtained.

It is clear that the government will move away from the current area based direct payments as these are seen to simply pay farmers for owning or occupying land.  Figures suggest that the top 10% of recipients currently receive almost 50% of total payments, while the bottom 20% receive just 2%. There will then be an agricultural transition period in England between 2021 and 2027 as direct payments are gradually phased out, being replaced in part by the new payment options.

Mr Gove stated that, “In its place, a new Environmental Land Management system will start from next year. The government will work together with farmers to design, develop and trial the new approach. Under the new system, farmers and land managers who provide the greatest environmental benefits will secure the largest rewards, laying the foundations for a Green Brexit”.

The direction of travel is clearly set out by Mr Gove, and it is clear he wants more for his money, linking future payments to deliverable objectives for the animal health, environment, water, soil or air. It looks as though in order to deliver this he will look to make money available for investment in productivity and increasing efficiency of production. The also appears to be possible funding for research and development. Farmers will need to look at what is available and then plan for the future; it is clear that the way in which farmer run their business is set for possibly the biggest shake up for generations. The way in which we farm looks set to change significantly and those farmers who are willing to adapt may be able to take advantage of the opportunities which lie ahead. We may find that some farmers adapt businesses to pursue future payments, whilst others look to gain investment money to increase their production. Either way in order to decide what is the best option for you, accurate assessments will need to be made, budgeting the many options available to you will be key; this will also need to be balanced with the labour available and the financial constraints of the business.

The is a suggestion that the government will look to delink payments from land occupation in order to allow for those wishing to retire and exit the industry and also make way for new entrants. Succession planning will be a key part of future business planning and this period may offer an opportunity to make the transition to future generations. For those on tenanted farms, it will be important to balance business objectives with the constraints of the tenancy in operation. Our Land agents will be working hard to ensure that both objectives can be achieved seamlessly and allow for farmers to progress and make best use of the opportunities available.

Call your local Farm Business Consultant for advice:
Northumberland & Borders: Andrew Jamieson 
County Durham: Elliot Taylor
Yorkshire: Simon Britton

X