9 August 2002

Borrowings at five-year high, figures show

SECOND-QUARTER farm borrowings have risen to a five-year high, according to the latest Bank of England figures.

During April to June, the UK agriculture, hunting and forestry sector owed the banks £7.93bn, a rise of £285m on the year.

"This comes as no surprise in an industry which is under so much pressure," says John Colley, senior agricultural manager at HSBC Agriculture.

The increase represents a rise of about 4% on the year, reflecting the annual trend seen since 1998, apart from a blip in 2001 caused by £1bn of foot-and-mouth payments. This reduced last years second-quarter borrowings slightly.

F&M compensation also boosted the industrys bank deposits last year. So, although the latest figures show second-quarter deposits fell by £315m this year compared with the same period in 2001, at £3.17bn they still represent a "reasonably healthy" 40% of borrowing which is in line with the five-year trend, says Mr Colley.

Nevertheless, farmers need to give a bit more thought to their business planning once the harvest and autumn rushes are over, he adds. "Farmers cannot afford to be cash-negative over the longer term. But we also have increasing evidence as to how farmers are going to reorganise themselves."

lScotlands farming industry owes the banks £1.23bn, according to new farm borrowing statistics published by the Scottish Executive.

After allowing for inflation, lending to Scottish farmers to the end of May 2002 was up 1.5% on the year. Figures are based on information collected from banks and mortgage companies operating in Scotland. Although total borrowings include advances to agricultural contractors and livestock salesmen, lending to farmers accounted for 96.5% of the total. Of that, 86.4% was lent to owner-occupiers. &#42