10 February 2000
Interest rate up yet again
By FWi staff
INTEREST rates are to increase by 0.25% to 6% bringing more pressure to bear on farmers burdened with loans, and making it increasingly difficult to compete with foreign producers.
The Bank of Englands Monetary Policy Committee recommended the widely predicted quarter-point increase at its monthly meeting.
Last month, the base rate rose a quarter point after remaining unchanged in December. There were quarter-point increases in September and November.
There had been concern about the steep climb in house prices and rising consumer confidence, which the MPC fears could indicate rising inflation.
It is using interest rates to counter the threat.
Farmers burdened with land and machinery loan repayments will be hit by this increase at a time when many incomes are already under severe pressure.
And the rate rise is likely to strengthen the Pound, drawing in cheaper imports and making UK exports less competitive.
Farmers leaders have repeatedly argued that the strength of Sterling has contributed greatly to the current crisis in the industry.
Many analysts expect interest rates to continue rising over the next few months, but believe the base rate will stay below its 7.5% peak in mid-1998.
The National Farmers Union estimates that more than 22,000 farming jobs have been lost across the UK in the past year – equivalent to one in 12 farm workers.
Figures derived from the UK Farm Business Survey estimate that incomes for general cropping farms will have fallen by 48% in the year to February 2000.
Hill-farm incomes are expected to have dropped by 25% and dairy-farm incomes are forecast to have fallen by 21% over the same period.
Pig and poultry farmers are expected to have lost an average of 8000 per farm over the past 12 months, compared with a loss of almost 14,700 in 1998.