Will a £160m investment into UK agriculture cut farming insolvencies?

The government is to invest up to £90m into farming technologies, as well as the creation of a £70m agric-tech fund to help farming innovation reach a suitable marketplace.


The strategy is designed to boost agriculture, as well as to increase sustainability, health and affordable food for future generations. The investment may also point to increased government interest in GM as a means for feeding future generations.


The agri-food supply chain, which includes agriculture, retail and catering, The Grocer estimates, contributes £96bn to the UK economy with over 3 million people relying on it for employment. Will the government’s investment be enough?


British farming is struggling. The government move to invest in agriculture is as much political as it is economical - it will almost undoubtedly have been thought up with one eye on the possible future of farming should the UK leave the EU. Currently about half of all total UK farming income is generated via subsidies from the Common Agriculture Policy (CAP). This figure amounts to close to £3bn per year. This year, for example, is likely to see smaller payouts from the EU, due to unfavourable exchange rates. This will lead to many agricultural businesses running into difficulty and in need of insolvency assistance.


Higher costs for essential sprays and feeds, diminished output, smaller single payments and tax demands are all going to place more and more pressure on many farms to remain profitable.


Defra figures suggest similar findings. DEFRA figures predict that average Dairy Farm Business Income is forecast to fall substantially by around 40% to £50,000 on average for 2012/13. Crop farms means will drop to around £84,000, a similar value to the average income in 2010/11. Additional DEFRA data predicts that average farm incomes will fall to £18,000 for lowland livestock farmers and to £14,000 for those farms operating in LFA (less favoured areas).


With such drastic falls in real income, combined with spiralling costs and tax demands, while government investment in agriculture is to be welcomed, £160m is not likely to be enough to save many agricultural businesses over the next few years.


It is for this reason that agriculture businesses need to look out for warning signs of business failure early and contact insolvency professionals like ourselves sooner rather than later to plan an effective course of action to secure the best outcome for all parties.


By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143.

View all Business Insights