23rd August 2019
Siann Huntley, Associate Director at Leonard Curtis Business Solutions Group, advocates taking positive action
Farming is the bedrock of the UK’s largest manufacturing sector, food and drink, and contributes £122 billion to the nation’s economy. British farming also employs 4 million people and provides 61% of the food eaten in the UK.
So, the support and positive strategic advice that their accountants – and specialist advisors like us – provide to them is essential. Never more so than now when they are finding themselves under significant pressure caused by a wide range of factors. But there are many possible solutions available and we always work hard to determine which is best for them – whether that’s debt or equity finance, property, legal or personal debt advice or restructuring.
UK farming today
According to Government figures, pressure on running a traditional working farm has led to 62% of them diversifying, seeking new revenue streams to keep their farms alive and generating a subsequent income of £680 million for the UK economy in 2017/18.
However, the event of a no‐deal Brexit would be “catastrophic” according to the National Farmers Union (NFU), creating crises never seen before. And even if a deal is agreed, the future of UK farming still seems very uncertain.
According to results of the latest NFU Farmer Confidence survey, that of British farmers has slipped to a new low, as uncertainty surrounding Brexit continues to weigh down on the sector.
Farmers say they still face uncertainty about future subsidy levels – last year they received £3.5billion in financial support through the EU’s Common Agricultural Policy (CAP) – which is leading to fears that farms could soon be “wiped out like the coal industry.”
So, more and more accountants are approaching us on behalf of their agri-clients for specialist advice and assistance on a wide range of operational and financial issues during these unprecedented tricky times – ensuring they’re in the strongest possible position to get back onto a firmer financial footing.
The most frequent farming issues
As we move towards what looks like life outside the EU, farmers and their advisers must consider its impact on the likes of trade tariffs, migrant workers and devolved farm payments.
Other issues include EU structural funding, regulations and, in Wales where I’m based, the future of its PGI certified food products. Not to mention possible changes to animal welfare standards that could see a ban on live exports.
We’re also working with farmers who are citing negative media surrounding meat and its impact upon climate change, as well as the boom of veganism, which is contributing to declines in sales of meat.
Add to these issues increasing energy costs, pressure to deliver lower food prices, unstable milk prices, a possible fall in exports, livestock diseases, unpredictable weather and resultant crop failure and livestock food shortages.
And farmers need to be able to keep abreast of consumer demands and be prepared to react to change.
Trying to stay one step ahead
In a bid to stay a step ahead, many of our agri‐clients have re‐mortgaged and borrowed against land and other assets to raise capital. From experience, we know that farms can only be refinanced so many times to raise cash for working capital and living expenses.
Once the traditional ceiling has been reached, you can look for alternative funding solutions, but these are likely to be more expensive and subject to a more aggressive collection strategy. Similarly, combining different types of lending, and therefore monthly repayment amounts and dates, can also lead to cash management issues.
We also work with many agri‐clients and their accountants who come to us for support and advice on issues relating to succession, including inheritance and the passing down of businesses, assets and roles to the next generation – very often without question and usually in need of professional advice.
Family relationships and legacy are often the source of farming disputes too which can be all too distracting for an already pressured business.
We frequently encounter issues with land when refinancing, including unregistered land, identification of ownership, the presence of numerous residences and the mix of enterprises and these are relevant in terms of general tax planning too. For many of our agricultural clients, land is a complicated business.
Farms tend to be managed as a partnership, which may not always be the most appropriate structure. It is also common that where farms have diversified and / or various enterprises are conducted on the land (for example add-on liveries, farm shops, tourism), that no regard has been given to separating the same in terms of structure or ownership.
Often family members are unaware of their personal liability in a traditional partnership structure, which can extend beyond the farm to personal assets.
Over many years, we’ve worked with hundreds of farmers in every conceivable quandary. In partnership with their accountants, we provide them with a wide range of professional services and advice, including legal, to help overcome pretty much all of them.
Confusion surrounding insolvency – and fear of repercussions from seeking advice from a corporate recovery professional – means that many farmers leave it too late to get help.
There is a misconception that asking an Insolvency Practitioner for guidance will automatically lead to the closure of the business and that isn’t necessarily the case.
On the contrary, our priority is always to try to save it if possible. Where we are referred in early enough, we can usually develop a practical strategy to put the farm back on a steady footing.