Accountant sets out 10-point plan to help farm businesses survive Brexit
With uncertainty hanging over the agricultural sector, a Norfolk accountant has set out a 10-point plan to help farmers to answer a key question: “Is my business fit for the future?”
Bruce Masson, a partner based in the Diss office of East Anglian chartered accounts MHA Larking Gowen, said while many questions remain unanswered about the post-Brexit farming landscape, adopting a "head in the sand" approach is not the right answer.
He said: "Michael Gove [the environment secretary] has referred to it as 'The Fourth Agricultural Revolution' and set out a timescale, at the end of which farmers in the UK will be operating without subsidies. Others have referred to it as a 'nine-year notice to quit'.
"Regardless of what it is called, the clock is running and now is the time for farmers to start thinking about how their farm will be placed by the time the last Basic Payment Scheme (BPS) cheque arrives in 2028."
Mr Masson said each farm business should ask 10 questions:
1. Do you have decent management information about how the business stands today? Start the process by listing the assets, liabilities, strengths, weaknesses, opportunities and threats facing your business
2. Have you prepared a 12-month future cash flow forecast? Even if the bank manager isn't insisting on seeing it, preparing a forecast is a good discipline. It isn't difficult and it's why we have spreadsheets. Once you're happy with your forecast, create some different versions to see how movements in yield, productivity or price might affect the bottom line.
You may also want to watch:
3. Will there be enough cash left to live on in 10 years' time? To find the answer, project your forecasts a decade into the future, taking account of the removal of BPS over the seven years from 2021.
4. How you will react? Now you've identified the extent of the problem, there are various options. At this stage, turning off the computer and thinking about something else is not one of them. You could instead:
5. Trim costs to the bone, accept a poorer lifestyle and hope something will turn up. But the 'hunker down' approach will only work for the well-capitalised freeholder who is prepared to endure the pain of living on far less money to avoid any other difficult decisions.
6. Work constructively with neighbours. Anecdotally, UK farms in some parts of the country are operating with about 40pc too much machinery. Look at sharing machinery, storage, labour and even land. Could you swap outlying parcels of land with others or increase/decrease farm size to arrive at your personal optimum? These arrangements will take time to implement, so now is a good time to start the process.
7. Think about the productivity of your own land. Are there areas which would lend themselves to environmental schemes, whether these be the current stewardship packages or the longer-term Environmental Land Management Schemes which will arrive in the future? Identifying such areas now and slotting the reduced overheads into your 10-year plan may help to close the gap.
8. Are there other under-utilised assets on the farm? These may lend themselves to diversification, either by yourself or perhaps by your potential successors. You could lease them to other entrepreneurs or sell them and use the cash elsewhere.
9. Do you have the appetite for this? Would now be a good time to start the handover process and bring in a new generation to deal with this challenging future?
10. Think the unthinkable. Is now the time to get out? This doesn't always mean selling up, although it might be the answer for some. It could involve letting the land or setting up a contract arrangement with neighbours or independent contractors.
If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box above for details.