26 June 1998

Beware borrowing

FARMERS should beware rushing into euro loans and overdrafts despite the apparent attraction of lower interest rates compared with borrowing sterling, according to Henry Graham, head of agricultural services with the Clydesdale Bank.

"Currency fluctuations have always made paying for non-sterling loans something of a minefield and the same applies to euros. The theory is that farmers can receive subsidies in euros and use them to pay for loans and overdrafts without any currency conversion.

"That may be an option in the future but it is not today. The whole issue has still to be debated by the government in consultation with the industry."

Mr Graham also urged farmers to look carefully at the supposed interest rate advantages currently on offer elsewhere in Europe.

"Long-term interest rates in the UK and the rest of Europe are converging. The real long-term gap could already be as narrow as 1% and might be narrower by the time farmers here are given the option to take subsidies in euros." &#42