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Slow-down in bank loans to Scottish farms ‘a sign of hesitation’ in sector

This was according to National Statistics Scotland which said total outstanding lending to Scottish farms had fallen 0.6 per cent since May 2017.

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Slow-down in Scottish bank loans ‘a sign of hesitation’ in sector

A slow-down in the total lending from banks to Scottish agriculture over the past year has been flagged as a ‘sign of hesitation’ in making investment decisions.

 

This was according to National Statistics Scotland which said total outstanding lending to Scottish farms amounted to £2.34 billion, which, when accounting for inflation, was a decrease of 0.6 per cent since May 2017.

 

A spokesman said: “This could be caused by overall weak growth in the economy or concerns that interest rates may rise in the future.”

 

The statistics also revealed £1.2 billion of debt related to hire purchase, leasing and other sources, with an estimated 51 per cent long term debts – a figure that has been ‘slowly increasing over time’.


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Total bank held debt was roughly the equivalent of 10 per cent of assets, it added, ‘a relatively low debt ratio, due to high value assets’.

 

NFU Scotland director of policy and member services Jonnie Hall said the increased levels of debt and borrowing taken on by Scottish agriculture were ‘more about farms and crofts having to take on greater levels of borrowing as capital to keep businesses ticking over during increasingly uncertain and challenging times’.

 

He said: “That is unsustainable in the long run.

 

Future support ‘critical’

“Delayed Common Agricultural Policies (CAP) payments in 2015, 2016 and 2017 will have exacerbated the industry’s level of borrowings.

 

“Scottish government loan arrangements for Basic Payment, Greening and LFASS will have helped the cash flow pressures on businesses but delays in delivering the full site of CAP payments will have compounded the vulnerability of many farm businesses.

“Add in that farm income statistics over recent years have highlighted reduced market returns across nearly every sector, while input costs have remained static at best.

 

“As a result, margins have been squeezed and farm business reliance on support payments has increased in absolute and relative terms.

 

“These borrowing figures simply underline the value and importance of on-going support to active producers and that determining the right package of post-Brexit policies and funding of future support for Scottish agriculture will be critical.”

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