The Brexit Effect: deal or NO deal
The last few months and weeks have been particularly fractious in parliament as to whether or not a Brexit deal will be struck or indeed any deal at all. Theresa May has confirmed that Parliament will get to vote on a Brexit Deal in mid-January. Here, Simon Britton considers the effect that Brexit has had on the way we think about our businesses.
Whether or not we are cut adrift from our European friends, Brexit has made farmers stop and think about how exposed and reliant their businesses are to European subsidy and support. As an example, according to the Farm Business Survey, the average farming business in the North East makes £71/ac profit, including £97/ac support from BPS in agri-environmental schemes. This is a stark figure and illustrates that, if indeed we do leave the EU and the current UK Agricultural Bill that is tabled comes to fruition, then there are a significant number of farming businesses that would need to make radical changes within their businesses in order to replace the income lost by the removal of farm subsidy.
For nearly a year, our 10 strong team of dedicated Farm Business Consultants have been working with our clients and contacts in order to give them an understanding of their exposure to the loss of subsidy and to understand how resilient their businesses would be moving forward.
I think that the past 12 months and the introduction of the draft Agricultural Bill, has been a catalyst for a number of farmers to understand the impact of the loss of part, or whole of subsidised support. I do think that all farming businesses that receive subsidy do need to review and fundamentally understand their reliance to different income streams, whether it be subsidy or livestock sales.
We have recommended to many of our clients that they prepare a Present System Budget, which will breakdown the turnover by enterprise and give a better understanding of how their business are structured. We can then carry out sensitivity analyses on income received from each of the enterprises be it livestock/crop sales or occupancy rates for their B&B. This will identify the reliance on each enterprise or income stream and what a shift in policy or price would mean to their turnover.
The UK government are already steering farmers towards this by offering competitive grants to improve efficiency and competitiveness, diversify their income streams, improve animal health and welfare alongside water quality.
As a nation, we wait, with baited breath, for the outcome of the Parliamentary vote and whether or not we exit Europe with a Deal or No Deal, if at all. Whatever the outcome, I hope that this has given farmers food for thought and allowed them the opportunity to understand and examine their farming businesses in more detail and hopefully act upon it.
If you would like to understand your business in more detail please contact Simon Britton.