Agriculture: Five steps to financial resilience in farming
- Credit: Getty Images/iStockphoto
How can the agricultural sector build resilience in the current challenging times? Farmers, financiers and politicians explored the options for Lloyds Banking Group’s Big Conversation
From Brexit and trade deals to extreme weather and a mental-health crisis, farming in the East of England has rarely been beset by such large and so varied a range of problems. Overcoming them is going to demand resilience – but how can farming businesses build that up?
That was the question posed by ‘Weathering the Storm – Building Financial Resilience in the East of England Agriculture Sector’, a discussion convened by Lloyds Banking Group as part of its initiative, The Big Conversation: Helping Britain Recover.
Chaired by Lloyds Banking Group’s Ambassador for the East of England, Matt Hubbard, it brought together Mid-Norfolk MP George Freeman, Chris Wilford of the Confederation of British Industry, Alan Nicholls of the Money & Pension Service, Peter Glancy of Scottish Widows and Lloyds’ East of England agriculture area director Ben Makowiecki.
They were joined by the National Farmers’ Union deputy president Stuart Roberts and East Anglian regional director Gary Ford, Melinda Raker, a Norfolk farmer and patron of the mental-health charity YANA (You Are Not Alone), and agricultural editor Chris Hill.
You may also want to watch:
The full summary of what was discussed will be available on the Lloyds Banking Group website, but among other points there was a broad consensus that to build resilience, farmers needed five things:
- 1 McDonald's branch to close for up to three months
- 2 'I ran for my life' - Neighbour who saw fatal row tells of terror
- 3 Hospital to close with loss of 120 jobs
- 4 Man dies after 'industrial incident' at farm
- 5 Mental health hospital owed £2m to staff and creditors when it shut
- 6 Injured man found on Norfolk beach could be linked to woman's death
- 7 Four fish and chip shops listed among the best in the country
- 8 Tributes to 'well-known, well-liked, well-respected' King's Lynn fan
- 9 Concern over state of beach following £22m sandscaping project
- 10 12 villages set to receive some of UK's fastest ever broadband
Brexit emerged as a clear cause of many challenges facing farming – from fears about access to European labour to uncertainty about the Environmental Land Management Scheme that replaces the Basic Payment Scheme.
Mr Hill said farmers needed more information about how ELMS would operate. “The first tier, the Sustainable Farming Initiative, is the access point for every farming business and that’s where the detail is needed on what the criteria is, and how it’s going to be funded.”
“We have to get some clarity about where we want the industry to go,” said the NFU’s Mr Roberts. “Farmers are not just food producers or just environmentalists. Farmers for generations have always been both and we cannot be put in the position where consumers or government force us to choose between those two... Future schemes need to make sure they take account of both food and the environment.”
There is also concern about the government’s approach to welfare and safety standards. Mr Freeman was one of only 14 Conservative MPs to vote against the government, in support of amendments to the Agriculture Bill that would have protected UK farming standards in future trade deals. “I’m continuing to campaign for a charter of UK standards in statute, a variable tariff regime and proper Parliamentary scrutiny,” he said.
“Certainty is always welcome but I’m not sure that’s coming any time soon, so we may be in for a period of even greater upheaval,” said Mr Wilford of the CBI. “What we need is agility and that comes down to personal resilience and business resilience. Farmers also need the personal ability and the training required to cope in an age of uncertainty.”
Mrs Raker highlighted how difficult that can be: “It takes courage to commit to doing something different and that’s often harder for older farmers. They need good systems of support with advisors to look at the business, see opportunities that could work and give them the courage of their convictions.”
The panel heard how some farmers are already reacting – some diversifying into glamping or opening a farm shop, others moving out of food production entirely. “There’s this massive change coming,” agreed Mr Roberts. “But there’s a well-known saying: in times of great change it is not the biggest or wealthiest that survive, but those that are fastest to adapt.”
A consensus emerged that, even before the arrival of Covid-19, the pressures of rising costs, falling revenues, question marks over pesticide use and the extremes of weather – as well as the political and regulatory uncertainty – had all eroded confidence. “In last year’s NFU confidence survey, 19% of farmers said they will be seeing a decrease in investment due to Brexit uncertainty and only 11% said they would be increasing investment,” said Mr Ford of the NFU.
Investment is the life-blood of any business but farmers are reluctant to take that step. “If we had certainty and confidence from the government, that would help,” said Mrs Raker.
“There’s a big role for the industry and lenders but also a big role for government to create the conditions so farmers can invest,” said Mr Ford. “We’ve talked a lot about confidence throughout and it’s a bit of a golden thread.”
“The UK has £4 trillion in pension funds,” explained Mr Glancy of Scottish Widows. “The pensions industry along with government has more of a role in investing in agriculture in the big infrastructure projects that maybe you wouldn’t talk to your bank about as an individual business. Let’s use that money to benefit our economy.”
“For me the key to financial resilience is knowing what you want to do. Having absolute clarity on where you want to go and then finding the partners who can work with you,” said Mr Roberts. “It is about having conversations with banks, not when you need the banks, but months and years in advance.”
“Too often the first we’ll hear of something is when someone’s already halfway to completing it and then we’re asked to provide financial support,” said Mr Makowiecki of Lloyds Banking Group. “If we have those conversations early, looking at short-, medium- and long-term strategy and where finance may be needed, it allows a deal to be shaped in the best way for us to help.”
One problem highlighted was that in multi-generational family farms, there can sometimes be disagreements about direction. Both Mr Nicholls and Mr Glancy stressed the importance of having a succession plan with the pension arrangements in place to allow the older farmers to retire without drawing from the farm’s operating finances.
5 Consumer support
Changing the relationship between farmers and the public is seen as crucial. “We need to build on the positives with consumers on how we’ve fed the nation through the past seven months or so,” said Mr Ford. However, the panel agreed that key is getting a fair price for food.
“If we stopped the continual drive for cheap food and valued the cost of production – showing the provenance would be excellent – and if the product is valued, that would help enormously,” said Mrs Raker.
“UK food has never been more plentiful or affordable for consumers. The challenge for farmers looking to increase margins is to add more Farmgate value and tap into consumer willingness to pay a premium for provenance assurance,” said Mr Freeman. “This needs to be done while ensuring high quality basic food for hard pressed consumers. There are many things that supermarkets can do to reduce the cost of packaging, food miles and food waste.
“We need to address the balance of risk and reward in the supply chain that is so inequitable at the moment,” said Mr Roberts. “All the risk sits at the farm end and most of the reward sits at the other end.” However, he cautioned that the food-service sector posed more of a challenge for farming than retail.
“Let’s educate consumers so that they appreciate the quality of British produce and can make good food choices,” concluded Mr Glancy.
The mental health problem in agriculture
“There is a sense that people expect more and more and more of farming, and yet the support network is less – and that is pretty frightening,” said Mr Freeman. “All of that is compounded by the isolation of the job. It is very challenging. I think in quite a deep way the industry feels like it is not in control of its own destiny at the moment.”
There was deep concern at the mental-health crisis in agriculture, which Mrs Raker sees first-hand at the charity YANA. “The helpline has never been busier. We must be seriously concerned about this,” she said. “One person in farming in the UK takes their life every week. I am sure that is going to get worse.”
There are no easy answers with this, but the advice was clear: talk to someone; talk early; don’t feel that you are powerless or alone.
Visit www.yanahelp.org or call 0300 323 0400