25th JUNE 2018
Brexit and the Farming Industry: Could asset finance help the agricultural community to bear fruit?
In March 2017, members of the farming industry voted overwhelmingly for the United Kingdom to leave the European Union which sprouted the phrase; Brexit. Without a clear plan outlined by the government, votes were cast based on speculation and predictions of how the future of the UK’s economy would hold up outside of the EU. And, despite the farming community receiving financial benefits from Brussels and unrestricted access to the European market since joining the EU, it was felt by many that the agricultural sector would be better off without the EU in the long term.
In 2018, the future with Brexit is still an unknown but there are likely to be implications for British Farmers once the separation arises. Despite belief across the farming industry that Brexit would be a good thing, such as bringing opportunities for new trading partners; making localised decisions at a national level; and cutting out the expense of European bureaucracy, there are several factors that could impact negatively, affecting profit and cashflow for agricultural workers and farm owners, as we’ve outlined below:
Subsidies: UK farmers could see a reduction in income if subsidies from Brussels are placed on hold during negotiations. The average farm is currently paid approximately £12,000 in annual income through a Basic Payment Scheme worth £2.67 billion to UK farmers overall. After Brexit, when the government controls spending of the public budget, farmers are likely to be required to demonstrate that public money is for public goods and will need to be seen to invest more in developing and protecting the local area and environment in exchange for government payouts. This potential system is could have a direct impact on income and cashflow, making it difficult for farmers to manage their costs without the support from a regular subsidy.
Trade: Another area that could end up costing the average British farmer is trade. Countries outside of the EU currently need to pay to gain access to the EU market of 27 member states, a freedom that the UK has enjoyed without tariff up until now. Once the Brexit process is complete, it’s extremely likely that farmers in the UK will also need to pay, with the additional cost likely to increase product costs, which will inevitably lead to an overall increased cost for the end user. Increased costs could affect farmers negatively, leading them to find alternative financial solutions, such as asset finance, to accommodate any pitfall in earnings.
Price: After Brexit, it’s expected that the UK will receive more imported goods at a lower price, with fewer regulations in relation to animal welfare and quality measures of agricultural products. If customers opt for cheaper deals without questioning the quality of the fruit, vegetables, and livestock they purchase, it will place UK farmers in a position to compete with price-cuts and could force them to compromise on the treatment of their products to minimise expense and make some profit.
Workforce: Agriculture has already seen a decline in the number of overseas workers employed to carry tasks such as fruit and vegetable picking after the Seasonal Agricultural Workers Scheme (SAWS) was abolished in 2012. With this trend expected to continue and worsen post Brexit thanks to reduced clarity over immigration policies and a growing sense of xenophobia, farmers could find themselves at a productivity breaking point with a dwindling workforce and higher salary payments for UK workers.
Through the complexities of establishing a suitable agreement between the UK government and the EU, farmers could stand to lose vital sources of income, and cashflow could become a critical issue. For business and farm owners working through periods of financial uncertainty, releasing the value in assets such as farming equipment and agricultural vehicles could offer a flexible short-term solution to ensuring expenses like payroll are covered, providing security to your employees without the need for a long-term loan with expensive repayments.
Davenham Asset Finance have a specialist team dedicated to agricultural asset finance and refinance with experience of over 30 years working with brokers that serve the farming industry. We would be happy to help with any enquiries in relation to releasing the value in equipment both as a result of the impact of Brexit, and to support your business growth. You can speak to a member of the Davenham team by calling 0161 832 8484 or emailing [email protected] to find out how you could benefit today.
In 2018, the future with Brexit is still an unknown but there are likely to be implications for British Farmers once the separation arises. Despite belief across the farming industry that Brexit would be a good thing, such as bringing opportunities for new trading partners; making localised decisions at a national level; and cutting out the expense of European bureaucracy, there are several factors that could impact negatively, affecting profit and cashflow for agricultural workers and farm owners, as we’ve outlined below:
Subsidies: UK farmers could see a reduction in income if subsidies from Brussels are placed on hold during negotiations. The average farm is currently paid approximately £12,000 in annual income through a Basic Payment Scheme worth £2.67 billion to UK farmers overall. After Brexit, when the government controls spending of the public budget, farmers are likely to be required to demonstrate that public money is for public goods and will need to be seen to invest more in developing and protecting the local area and environment in exchange for government payouts. This potential system is could have a direct impact on income and cashflow, making it difficult for farmers to manage their costs without the support from a regular subsidy.
Trade: Another area that could end up costing the average British farmer is trade. Countries outside of the EU currently need to pay to gain access to the EU market of 27 member states, a freedom that the UK has enjoyed without tariff up until now. Once the Brexit process is complete, it’s extremely likely that farmers in the UK will also need to pay, with the additional cost likely to increase product costs, which will inevitably lead to an overall increased cost for the end user. Increased costs could affect farmers negatively, leading them to find alternative financial solutions, such as asset finance, to accommodate any pitfall in earnings.
Price: After Brexit, it’s expected that the UK will receive more imported goods at a lower price, with fewer regulations in relation to animal welfare and quality measures of agricultural products. If customers opt for cheaper deals without questioning the quality of the fruit, vegetables, and livestock they purchase, it will place UK farmers in a position to compete with price-cuts and could force them to compromise on the treatment of their products to minimise expense and make some profit.
Workforce: Agriculture has already seen a decline in the number of overseas workers employed to carry tasks such as fruit and vegetable picking after the Seasonal Agricultural Workers Scheme (SAWS) was abolished in 2012. With this trend expected to continue and worsen post Brexit thanks to reduced clarity over immigration policies and a growing sense of xenophobia, farmers could find themselves at a productivity breaking point with a dwindling workforce and higher salary payments for UK workers.
Through the complexities of establishing a suitable agreement between the UK government and the EU, farmers could stand to lose vital sources of income, and cashflow could become a critical issue. For business and farm owners working through periods of financial uncertainty, releasing the value in assets such as farming equipment and agricultural vehicles could offer a flexible short-term solution to ensuring expenses like payroll are covered, providing security to your employees without the need for a long-term loan with expensive repayments.
Davenham Asset Finance have a specialist team dedicated to agricultural asset finance and refinance with experience of over 30 years working with brokers that serve the farming industry. We would be happy to help with any enquiries in relation to releasing the value in equipment both as a result of the impact of Brexit, and to support your business growth. You can speak to a member of the Davenham team by calling 0161 832 8484 or emailing [email protected] to find out how you could benefit today.