UK farm borrowing almost doubles in a decade

British farmers are set to end the year owing their banks £1.5bn more than they did a year ago and nearly double what they owed a decade ago.

Bank of England statistics show lending to British agriculture hit a new record high of £17.7bn in the year to the end of October 2015.

This is a 10% increase year-on-year and is over £8bn more than farmers were borrowing a decade ago.

See also:  Farm borrowing rises to a new record level

The figures have emerged as the AMC revealed that it is on track to approve a record amount of lending in 2015, with its figure expected to be up 20% on 2014.

Demand for borrowing was strong in the arable, dairy, beef, sheep and poultry sectors despite poor ex-farm prices, said AMC’s senior sales and agriculture manager Simon Eales.

Loans were split equally between land purchases, capital investment projects and restructuring existing bank finances.

“Customers have used long-term, low interest rate loans to invest in a number of different ways, such as generating new income streams, reducing production costs and – in some instances – becoming vertically integrated to maximise their profitability,” he said.

“Loans for land purchases, working capital and restructuring shorter term debt over a longer period have also formed a prominent part of lending applications, as has support of diversified farm enterprises and landed estates.”

Last week, the NFU called on the banks to continue support ahead of predicted cashflow problems affecting much of the farming industry.

It said low commodity prices, the late arrival of Basic Payment Scheme support, recent flooding and the introduction of the National Living Wage would all continue to hit farmers’ finances.

NFU president Meurig Raymond said: “Cashflow problems are arguably the biggest threat for farm businesses at present.

“The NFU has been working directly with the banks to ensure a positive dialogue continues in the face of external factors, outside of our control, which are having an impact on farmers’ bottom lines.”

Banks are urging anyone likely to need extra funds, for example, because of delays with their BPS cash, to talk to them immediately.

But they also stress that farmers should make sure they have cashflow plans and budgeting information available.

Roddy Mclean, director for agriculture at RBS, said: “As always, our advice to businesses would be to approach your bank sooner rather than later with any concerns or issues regarding cashflow.”

Mark Suthern, head of Barclays Agriculture, added: “Barclays will support any farming customer impacted by delayed BPS payments and is encouraging farmers to plan ahead now.

“Many farming sectors have experienced tough trading conditions in late 2014 and throughout 2015 therefore planning for cashflow is imperative to help farming businesses manage their finances.”

Allan Wilkinson, head of agriculture at HSBC, suggested the company wanted to help businesses progress in the most realistic way.

“Despite the very challenging times in which farmers are now operating…we continue to see many well-run businesses in the sector and are eager to support them.

“Budgeting, bench-marking and monitoring are essential tools in every farm business, and our discussions with customers and non-customers alike take into account a farmer’s individual circumstances, needs and capabilities.”