Agricultural borrowing has reached an all-time high after lending increased by almost 4%, according to latest figures from the Bank of England.

Loans to agriculture reached record levels of £9.72bn at the end of June, up 3.8% from £9.37bn in the same period last year.

Lending had also increased by 3.5% from the end of March to June, when total borrowings were £9.39m, the Bank of England figures also revealed.

‘Difficult conditions’

Euryn Jones, Barclays’ agricultural policy director, said the figures reflected the difficult trading conditions many farmers had suffered so far this year.

“However, not all increases in borrowing are due to banks supporting businesses through difficult times,” he said.

“A number of farmers are also borrowing money to invest in their future.

“Confidence to reinvest in farming businesses has been boosted by the prospect of higher commodity prices in some sectors.”

‘Base rate peak’

 Paul Spencer, head of the Agricultural Mortgage Corporation, said increased costs and the poor weather could affect confidence, but said the Bank of England MPC’s decision not to increase interest rates last week would be “some relief”.

“Our view is that we are at, or close to, a likely peak in base rates. Many of our customers are ‘hedging their risk’ by enquiring about fixed interest rated for longer-term borrowing,” he said.

“We recommend that farmers speak to their local professional advisors to consider how best to manage their own financial risk.”