Tag Archive: Brexit
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 / email@example.com
Whilst reflecting on the new year ahead, a conversation with my 10-year-old daughter got me thinking. According to the ONS life expectancy calculator, statistically there is a very good chance that my children’s generation will still be around in the year 2100.
That took me straight back to my own childhood and wondering what life would be like in the year 2000, my young imagination running overdrive over living in “the future” – travelling by flying car and the domestic chores done by robot. The reality is that we are now 20 years beyond the millennium and despite being a ‘space date’, life in 2020 does feel remarkably similar (including having to unload the dishwasher) to an observer from 40 years ago.
However, events towards the end of the last decade precipitated some market changes to the point where they are now a reality for our region, our business and our clients.
Commercial property wise, we have seen an uneven trend to the flow of high street bank valuations during the Brexit epoch. There is a significant amount of alternative investment being placed, including joint ventures and use of private equity, to deliver some great projects across the region.
We are starting to see some output from the strategic planning and investment by the Combined Authorities and Mayoral posts. Our commercial property team have recently been appointed as property managers for the commercial property at Teesside International Airport, under the progressive alliance between the Tees Valley Combined Authority and Stobart Group, one of a number of exciting initiatives driving commercial development and job creation in the north east.
The development land market has proved stable and we saw a number of completions of significant residential development sites over the past year. We secured planning consent and sold land for 200 units at Killingworth to Avant Homes, as well as completions to Bellway and Barratt Homes. We are seeing Housing Associations being an increasingly active contributor in the market.
On the planning front, we are helping a number of clients ready themselves for future Local Plan reviews. The timing of reviews is interesting, with three combined Authorities now on-line and with ambitious growth plans. Our combined offering of planning and valuation expertise alongside market knowledge and experience of setting up delivery partnerships is in strong demand to demonstrate deliverability.
Regional house builders and self–build plots still feature importantly in the north east market. Figures from the Federation of Master Builder’s House Builders’ 2019 Survey indicated that over 30% of SME builders still report availability of finance as a significant constraint. On the back of confidence in stability of north east markets (and with markets in the south suffering), alongside low interest rates we are seeing successful private investment models and specialist funding starting to scale up to larger sites.
Our Northumberland estate agency team continues to fly, with sales prime locations selling very strongly and performance up a further 20% year on year. Quality property continues to be a strong draw for re-investment of north-east business wealth.
Technology is changing the way we interact with each other and our clients. However, all of the successful trends we are seeing in the region are as a result of human interaction and initiative.
As a business we continue to adapt and respond to opportunities, using technology to build on client relationships rather than replace them. Whilst we may be living in “the future”, most business is still done through face to face meetings and with a cup of coffee (even if we don’t yet have a robot to wash the cup). The same will apply in 2100.
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 firstname.lastname@example.org
Liz Dixon, Elliot Taylor and Alan Falshaw
Summer 2019 has been a good one for our Farm Team in many ways. Associate, Sally Horrocks returned to the fold from maternity leave and has been joined by two new Assistant Farm Business Consultants, Phoebe Wreford-Glanvill in Alnwick and Stephen Brown in Bedale. The efforts and many hours of hard work put in by Jamie Oliver and Alan Falshaw have been acknowledged and rewarded with their promotions to Farm Business Consultant and Senior Farm Business Consultant respectively.
Leading the team Simon Britton received word this week that he has been nominated to become a Fellow of The British Institute of Agricultural Consultants (BIAC) and in his words said “this doesn’t come about because of one individual, this comes from a team working hard, pulling in the same direction, and for me this is a recognition of the whole Farm Team and I’m really proud of that”
With the undoubted uncertainty ahead the team are clearly ready for the challenge and well positioned to take on the opportunities that will be presented – bring on Brexit!!