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Year of the family farm round-up: Key themes to discuss

A special 12-month series focusing on the opportunities for family farms in the UK.

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Farmers Guardian’s Year of the Family Farm initiative, which drew to a close this week, has driven a thought-provoking and challenging conversation covering some of the most important aspects of agricultural life. Experts have offered their advice on how farmers can begin to tackle wellknown stigmas, as well as offering ideas for how businesses can become more resilient, futureproof and progressive. Advice has been broad, but themes have emerged from the topics tackled.

 

Wider than agriculture

 

Farm businesses are increasingly understanding the importance of diversity. This is being reflected in the farmland market, where agents have reported an increasing level of demand for units with the potential for new income streams which are linked to, but not totally reliant, on agriculture.

 

Against a backdrop of reduced farm profitability and a great deal of uncertainty surrounding the future of support payments, not putting all your eggs in agriculture’s basket seems a sound move. William Waterfield of the Farm Consultancy Group said that, done right, the income from a successful diversification can quickly become bigger than the farm. But he also issued a health warning.

 

He said: “Diversifications nearly always require a different skillset from what most farmers possess.

 

“Those who find their farm business struggling should put more time and effort into the core operation rather than diluting it into something else.” Developing assets already in the business may be a good place to start. Redundant farm buildings and underutilised space on-farm may be a good starting point for analysing what diversification potential a holding has. Houses in the countryside are in short supply and those which do exist are typically more expensive than urban residences.

 

Alister King-Smith, head of planning services at Stags, said: “A good place to start is to look at current building stock available on the holding and assess what is available for conversion.

 

“Providing there is something there which would qualify for conversion to a dwelling under permitted development rights, this is often a sensible option to look at.”

 

Renting out a barn conversion or even a new-build house can be a long-term reliable source of income which does not rely on agriculture or could provide family or staff accommodation in a secure asset. Regardless of the diversification, what is crucial for family farms to appreciate is the need for proper analysis before taking action.

Key questions on diversification

 

  • Is there a real need for my diversification?
  • What competition do I have?
  • Who is going to be responsible for running it?
  • What would be the impact on the farm business?
  • How am I going to pay for it? Can I afford it?
  • Do I have the skills to make this a success?
  • Would I be better investing my time and money in the core farming activity?

Focus on finance

Regardless of a farm’s size or sector, its long-term viability will ultimately be decided by one thing, profitability. Peter Griffiths, a director with Hazelwoods, said he has seen many examples of family farms implementing inefficient tax structures and managing their finances badly. Bad record keeping, not taking advice before making significant sales or purchases and leaving accountancy to the last minute were outlined as three common errors.

 

He said: “At the very least farmers should be meeting with their accountant or advisers annually to let them know about any decisions they are thinking about making.”

 

Furthermore, the Year of the Family Farm series uncovered there were a number of tax reliefs being underused by farm businesses. Pension contributions, capital allowances, marriage allowance, tax-free gifts, averaging and agricultural property relief were all highlighted by tax expert Rob Selley from A.C. Mole and Sons. However, there is far more to farm finances than paying less tax.

 

New course

 

Developing an existing business, or starting a new one, opens the door to charting a new course; one which could include share farming and machinery sharing. Share farming can bring complementary skills, machinery, experience and labour into one enterprise. Moule and Co director Hannah Moule explained the potential benefit. She said resources can be pooled allowing a business to access assets it cannot afford or justify in its own right, such as specialist machinery or new technology.

Key questions on finance

 

  • Do you know and fully understand your costs of production?
  • If direct support reduced or disappeared, where would it leave you?
  • If you are borrowing money, are you getting the best rate?
  • Can you work your machinery harder?
  • Do you have neighbours who you could work with to share machinery and labour costs?
  • Are you as tax efficient as you can possibly be?

Key questions on finance

 

  • Do you know and fully understand your costs of production?
  • If direct support reduced or disappeared, where would it leave you?
  • If you are borrowing money, are you getting the best rate?
  • Can you work your machinery harder?
  • Do you have neighbours who you could work with to share machinery and labour costs?
  • Are you as tax efficient as you can possibly be?

It is all about the people

What has shone through more than anything in this series is success starts and ends with people. Family farms often involve several generations with a number of households all drawing an income from the operation. But as business experts have explained, a farm’s management structure, job descriptions, roles, responsibilities and decisionmaking process is rarely formalised.

 

When things are going well, issues tend to stay below the surface, but tougher times will lead to cracks appearing. George Cook, a senior business consultant with The Anderson Centre, summed the situation up. He said: “The catalyst for issues will arise from money, but ultimately there are a whole raft of things ticking away which relate to farming policy and business planning.”

 

So what can be done?

 

Understanding what every family member wants and needs from the business is the starting point. For the younger generation, this might mean professional development; training, travel, more responsibility and a clear pathway of where their farming career is leading.

 

It may be they are unlikely to be in sole control of the farm for 25 years, but being open and honest will help everyone make better decisions. At the same time, understanding that another family member might be perfectly happy doing all the tractor work is just as important. Succession is a word which has been mentioned dozens of time throughout this series, and with good reason. For older generations involved in family farms, it is a massive issue which continues to be swept under the carpet.

 

Louise Speke, the CLA’s chief tax adviser, said succession must be discussed, but it is left too late. She said: “A lot of the calls we get about succession planning are from individuals in their 70s and 80s. “If you want to think about how you are going to manage the transition of assets and the business, it takes time if you want to do it well.” Failure to address issues such as succession, as well as the subjects entwined in it, such as wills and divorce settlements, not only hold family farms back, but put their future existence at risk.

 

Victor Collins, partner at Nelsons, said: “There are few occupations where home and work are so interrelated. The farm is not just a home and business, but a way of life.

Key questions about people

 

  • Who is involved in the family farm, and what roles do they play?
  • Do you understand each family members’ ambitions and goals?
  • Do you have a formal structure, and is it written down and recorded?
  • Do you hold regular meetings so everyone knows what is happening in the business?
  • What have you done about succession planning?
  • Have you made a will? What would happen if a family member died or became ill?
  • What is your contingency plan?

Expert opnions

Year of the Family Farm has taken a comprehensive look at the challenges facing our country’s family farming operations, as well as the opportunities. Not only has it been full of expert advice, but the online hub will continue to be a fantastic resource for all farmers.

 

  • By Anita Roberts, director of agriculture, EMEA, NSF International

 

For family farms to remain competitive, they need support and guidance. This series has highlighted many of the challenging issues facing these businesses which are such an important part of the fabric of rural life.

 

  • By Jackie Bradley, product manager, Volac

 

The overriding message is to be aware of your obligations, and be prepared to seek professional advice and guidance. Whether this is including insurance costs at the research stage of a diversification project, compliance with landlord responsibilities when letting farmhouses or cottages for residential use, or applying clear and simple health and safety procedures, the same principle applies.

 

  • By Alexandra Wellings, managing director, Farmers and Mercantile

 

As a company which works with more than 12,000 British farmers, we were delighted to be associated with this series. Many important topics have been covered over the course of the year and the online hub will continue to be a valuable reference point to access further information.

 

  • By Richard Phelps, UK agricultural director, ABP
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