Farmers in the north of England are depending on subsidies for their
survival, according to new research from rural business advisers.
Many would not be viable without income from regular subsidy
cheques, which currently exceeds profit, says the annual farm profits
survey from the Institute of Chartered Accountants’ Farming & Rural
Business Group (FRBG).
Average net trading profits are now just over £40,000, less
than the average subsidy income of almost £46,000, according
to the FRBG. This is proving an unhealthy situation for the long-term
sustainability of farm businesses, as future subsidy levels will
decline as part of EU policy.
The emphasis of subsidies will continue to move from production/land-based
subsidies such as the Single Payment Scheme to rural development
schemes, says the survey. Understanding and adapting to this shift
will be important for the survival of farm businesses
Average net borrowings in 2006 were almost £230,000, up
from just over £200,000 the previous year, almost certainly
as a result of the delayed 2005 Single Payment. Meanwhile, the
survey showed average total drawings of £50,500, which although
less than 2005, were nevertheless greater than net trading profit – another
warning that many of the farm businesses were not sustainable in
the long term.
All this points to the continuing need to develop alternative
incomes to traditional family farming, says the FRBG, with the
vast majority of accountants (88%) reporting that their farming
clients were looking at diversification.
The most popular options were letting land/property (67%); holiday
accommodation (64%); letting of storage space (49%); tourism/leisure
(48%) and sports activities (32%). In practice, three in 10 (29%)
of farms within the scope of the survey had already diversified,
mainly into letting property and farm contracting. On average,
the net profit was over £11,700 higher on farms which had
Almost half of the farms had introduced capital from a non-farming
activity such as paid employment off-farm – a further indication
that traditional farming activities were no longer being relied
on as the sole income source.
FRBG North East spokesman Andrew Ayre, a partner at Greaves West
and Ayre, Berwick, said: “The survey confirms the continuing
pressure on cash flow of the long-delayed 2005 Single Payment Scheme.
“It is also evident that the long-term survival of farm
businesses depends on adapting and understanding the evolving subsidy
schemes over the next few years. The survey shows that the long-term
sustainability of the farming sector depends on second incomes
from non-farming sources.”
The survey covered a total of 207 farms, comprising over 40,000
hectares. Of these 30% were in the North – 11% in the North
East and Cumbria.
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