Big savings to be made when EMU starts, say bank chiefs
By Tim Relf
BIG savings could be made by British farmers when economic and monetary union begins next year, according to Barclays Bank head of agriculture, John Page.
Opportunities exist despite the UKs stand as one of the four "out" countries, moving more slowly than the 11 "ins", says Mr Page, his comments coinciding with the minting of the first euros this week.
He expects farmers will be able to receive subsidies in euros, rather than in sterling. And this income stream will allow access to euro loans and overdrafts, with interest rates well below the domestic level.
"Borrowing in sterling costs about 9%-9.5%. For Continental farmers, it can be as low as 4.5%.
"I have yet to come across anyone who does not think it is a good idea for farmers to be given the choice." As many as a fifth could snap up the chance and run such accounts alongside sterling ones.
This will allow easier access to cheaper inputs, such as machinery, fertilisers and sprays. It also could open up new export markets, with British produce more attractive without exchange rate risks and currency conversion costs, he adds.
The table shows how, on a 400ha (1000-acre) combinable crop farm, profits could be boosted 74% to £52,430. It assumes that a 33% saving can be made on mortgage costs, as well as 15% on machinery, fertilisers and chemicals.
Big arable businesses are poised to make the largest gains, given their higher borrowing requirements and existing trade links with Europe.
But the new financial landscape – and the passing of "E-day" on Jan 1, 1999 – will offer benefits elsewhere. For example, Welsh stock areas exporting lamb to Italy and France could make more money, says Mr Page.
Norman Coward, Midland Banks agriculture director says that while interest rates at home and on the Continent are converging, benefits will persist for some time. "But they will disappear if we join in 2002, because rates will be harmonised."
He, too, thinks uptake will be high. "The pressure on incomes is such that farmers cant afford not to look at something that might save them money."
Ancillary industries should also look at the possibilities. "As should anyone doing business with any of the 11 countries in euro-land," says Mr Coward.
Benefits of trading in Euros
Option 1 Option 2
Sterling Euro plus Sterling
(£000) (E000) (£000)
Sales/IACS 346 198 200
Costs 263 109 168
Finance cost 33 20 10
Drawings 20 7 15
Surplus £30,150 £52,430