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Brexit may force farm businesses to tighten belts

News

As the dust left by the EU referendum vote starts to settle, business leaders have moved to nail down facts about the future, with some issuing stark warnings about firms’ profitability. 

 

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A weak pound will open up opportunities for second-hand equipment
A weak pound will open up opportunities for second-hand equipment

It came as Barclays announced it would make 100 million available in loans to enable the agricultural sector to improve efficiency and create additional revenue streams to limit effects of market volatility.


Oliver McEntyre, Barclays national agricultural strategy director, said the fund would also help farmers modernise their infrastructure.

 

Machinery


Machinery manufacturers reported retail prices had risen about 4 per cent since the Brexit vote, due to increased import costs.


William Judge, national sales manager at Massey Ferguson, said businesses would be able to shoulder a small increase in the cost of parts, but large jumps in price could make some businesses untenable.


"Big moves of 5 to 10 per cent - you have got to react to that otherwise you will not be in business," said Mr Judge, adding the weak pound would open up more export markets, as well as opening up opportunities for second hand equipment.

 

Lending


The uncertainty following the vote to leave could have an effect on lending, making investment decisions even more limited, according to Richard King, partner and head of business research at Andersons Farm Business Consultants.


"Given the level of uncertainty, banks are likely to focus even more on the viability of the business proposition," said Mr King.


This could mean businesses need to do more to prove to banks they should lend to them.


"There are potential impacts of Brexit on land prices therefore the case of borrowing against assets would weaken further," he added.

 

Land values


But Gordan King, partner at DM Hall Chartered Surveyors, offered some reassurance over land values.


“There is no immediate reason to believe that income or values in the countryside will be adversely affected by the decision to leave, particularly in the short term," said Mr King.


He also said the recent rise in values was not necessarily down to rising profits or low interest rates and land was seen as a reliable asset in times of uncertainty.


"The UK is in a settled part of the world, peopled on the whole by mutually supportive, confident communities. Market sentiment responds more to this, and to stable, forward-thinking, well-advised governments than it ever will to CAP subsidy alone," he added.

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