Recession offers opportunities for farmers, says Old Mill
Farmers are well placed to weather the recession, and could even find opportunities to improve their businesses, according to accountant Old Mill Rural Services.
“Traditionally, agriculture has fared better during economic downturns than other sectors,” says Partner Ian Sharpe. “Although some farmers may find it difficult to secure credit, the industry as a whole looks set to ride out the economic storm. Many farming businesses are backed by property assets, and despite the drop in house prices, the market for land and farms remains strong.”
Naturally, there are threats – most farms now rely on some form of diversification, which may be more likely to be affected by the downturn, he adds. “Anyone with holiday cottages could face an uncertain year – but with more people holidaying in the UK, farm tourism and accommodation could actually stand to benefit.”
Farm shops could potentially suffer from decreased spending on food and drink, although demand for local produce remains strong, says Mr Sharpe.
The most vulnerable sector is likely to be industrial units and office lets. “The number of businesses going into administration has soared, so landlords must be aware of potential problems with their tenants. Not only could they be left with rent owing, they may struggle to rent out units after they have been vacated.” Landlords left with empty commercial properties will also be liable for full business rates, so should take advice on how to keep such expenses to a minimum, he adds.
The first step to recession-proof a business, and even take advantage of the new economic climate, is to assess cash flow requirements, says Mr Sharpe. “Most businesses do not fail due to a lack of profits, but because they run out of cash. Prepare a budget and if you are likely to need more borrowings, give your bank as much warning as possible.”
Farmers should also keep on top of money owing and chase up debtors regularly, he adds. “In addition, stay up to date on your own payments, so that you do not suffer unnecessary interest or late payment charges.”
With the Bank of England base rate falling to 0.5%, the cost of borrowing has dropped sharply, making now a good time to invest for the future. “Many builders and contractors are struggling to secure work, so farmers have the perfect opportunity to carry out repairs at competitive rates,” says Mr Sharpe. “Now may also be a good time to consider fixing loans at current interest rates, to reduce risk in these volatile markets.”
The weaker Pound against the Euro is also hugely beneficial, boosting the value of the single farm payment by around 20%. “It is possible to lock into this favourable exchange rate by taking out a Euro loan from your bank. This not only removes the risk of future currency fluctuation, it could significantly boost farm incomes,” he adds.
“While no sector is entirely sheltered from the economic downturn, farmers who protect against risks and take advantage of opportunities are most likely to weather the storm and strengthen their business for the future.”