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Is your farm fit for Brexit?

Is your farm fit for Brexit?

Thursday, 17 September 2020

We’re now past the point at which the transition period for Brexit could have been extended. The coronavirus pandemic has stolen all the headlines this year but we’re now hurtling towards life outside the EU in an even more uncertain world than we were only six months ago. How can British farming survive Brexit?

Our farming ten-point plan blog by Bruce Masson, published last year, is still relevant, perhaps even more so now. For the last few years, all commentators have been telling farming businesses to diversify and it’s many of the diversified farming businesses that have been affected more in the pandemic than ones that are, for want of a better description, pure agriculture.

The farming ten-point plan isn’t about diversification but focuses on the core business:

  1. Do you have decent management information about how the farming business stands today? If not, start the process by listing the assets, liabilities, strengths, weaknesses, opportunities and threats facing your farming business.
  2. Have you prepared a 12-month future cashflow forecast? Even if the bank manager isn’t insisting on seeing it, preparing a forecast is a good discipline. It isn’t difficult, and it’s why we have spreadsheets. Once you’re happy with it, create some different versions to see what movements in yield, productivity or price might mean.
  3. Now roll the forecasts forward ten years, taking account of the removal of the Basic Payment Scheme (BPS) over the seven years from 2021. Is there enough cash left to live on?
  4. How you will react? Now you’ve identified the extent of the problem, there are various options, but turning off the computer and thinking about something else is not one of them. You could instead:
  5. Hunker down. Trim costs to the bone, accept a poorer lifestyle and hope for something to turn up. This will only work for the well capitalised freeholder who’s prepared to endure the pain of living on far less money in order to avoid any other difficult decisions.
  6. Work constructively with neighbours. Anecdotally, UK farms in some parts of the country are working with about 40% too much machinery. Look at sharing labour, machinery, storage or even land. Could you reorganise to swap outlying parcels or increase/decrease farm size to arrive at your personal optimum?
  7. Think about the productivity of your own land. Are there areas which would lend themselves to environmental schemes, whether these be the current Stewardship packages or the longer-term Environmental Land Management Schemes which will arrive in the future?
  8. Are there other underutilised assets on the farm? These may lend themselves to diversification, either by yourself or perhaps by your potential successors. You could lease them to other entrepreneurs or even sell them and use the cash elsewhere.
  9. Do you have the appetite for this? Would now be a good time to start the handover process and bring a new farming generation in to deal with this challenging future?
  10. Think the unthinkable. Is now the time to get out? This doesn’t always mean selling up (though it might be the answer for some). It could involve letting the land or setting up a contract arrangement with neighbours or independent contractors.

Whatever happens, ‘head in the sand’ is not the right answer.

Need help?

If you’d like any further information, please speak with a member of our agriculture team. You can find contact details on the Our People section of the MHA Larking Gowen website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Laurie Hill

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