10 September 1997
NFU meets bank governor over strength of sterling
By Boyd Champness
NATIONAL Farmers Union president Sir David Naish met with Bank of England governor Eddie George last night to discuss the peril facing British farmers caused by sterlings rise over the past year.
UK farm product prices have plummeted by up to 30% over the past 12 months and are continuing to fall in most agricultural sectors.
Following the meeting, Sir David said: “I explained to the governor the precarious state of many farm businesses in England and Wales. Our important industry consists of many tens of thousands of small businesses which are exposed to the effects of strong sterling both through falling market prices and reductions in direct payments from the EU.”
Sir David said the farmgate value of UK agriculture production was likely to fall by £2bn in the coming year affecting nearly every sector of production including horticulture, dairy, livestock, poultry and cereals.
The NFU concedes that the rising sterling has lowered input prices, such as the cost of fertiliser, but maintains that this doesnt compensate for the losses incurred by the rising pound. To illustrate his point, Sir David said farm investment had fallen sharply with purchases of machinery well down.
However, short of talking down the pound and making comments on the negative impact sterlings strength is having on the UK economy – there is little the governor can actually do to reverse its climb.
The sterling is market driven and investors around the world are putting their money into the pound because they perceive it as a high yielding and secure investment compared with other currencies.
This problem has been heightened by the UKs stance that it will be an unlikely participant in the first wave of European countries to embrace a single European currency in 1999 – resulting in greater demand for the pound.
Sir David added: “I am sure the governor understood our points, while he stressed the need to keep inflation under control.”