Farms’ lack of business planning highlights risk for agricultural transition

Many farm businesses in England may struggle to cope with the challenges of new agricultural policies and the withdrawal of the Basic Payment Scheme, given that a majority do not engage in formal business planning or seek external professional advice, according to a major survey of rural businesses by the National Innovation Centre for Rural Enterprise (NICRE). You can download the report from the University of Gloucestershire’s research repository.

More than six out of 10 farms surveyed in the North East, South West and West Midlands said they did not have a formal written business plan, while almost 80% had not accessed external support from any advisory service.

In the policy shake-up following the UK’s exit from the European Union, regulations and red tape were the most commonly-cited obstacles to farm business success with 71% of farms identifying them as a key concern, compared to less than half of other rural businesses.

The findings from NICRE’s rural business survey carried out last summer indicate that farms’ experiences of the pandemic differed considerably to that of non-farms. This reflects the different context and nature of farming, where big changes in agricultural policy and markets dominated their trading situation, by comparison to more limited impacts of Covid.

Infographic detailing statistics taken from the report that the article refers to.

NICRE Co-director Janet Dwyer, Professor of Rural Policy at the Countryside and Community Research Institute (CCRI), one of NICRE’s founding university partners, said: “This is a period of monumental change for farmers and while our findings showed that farms fared better than rural businesses in respect of the negative impacts of Covid-19, this doesn’t mean that they are better placed to cope with ongoing and future challenges for the rural economy.

“Careful medium-term planning, and building in the headroom to innovate, remain essential tactics for farms’ survival just as much as for other rural businesses, in these challenging times.

“Our evidence that farms are less likely than other rural businesses to engage in formal business planning and seek advice highlights a potential future risk, as farms position themselves to cope with the ongoing transition process and slow roll-out of the new schemes.

“In turn, Government should recognise its key challenge – underlined by the overwhelming concern with bureaucracy revealed in our survey – to deliver its new policies in ways that are truly accessible and will enable all farms to deliver a high-quality environment alongside excellence in food production, energy generation and other key services.”

Around a half of the 529 farms surveyed reported that their turnover stayed the same in the previous 12 months, compared to around a quarter of other rural businesses. Nearly three-quarters of farms reported that they generated a profit or surplus, compared to 66% of rural firms. Almost four out of 10 farms reported no impact of the pandemic, compared to just one in 10 rural businesses. NICRE’s latest in a series of State of Rural Enterprise Reports – Farm business performance: planning, adaptation and resilience – also found that farms were much less likely to use Government’s Covid support measures than other rural businesses, with just over half (54%) of farms accessing it, compared to 70% of rural businesses.

The evidence shows that farms were more likely instead to draw on family support to reduce their pandemic-related costs, typically family members working longer hours, or family money being used to support the business.

NICRE’s findings regarding farmers’ lack of business planning ring true for Exmoor Farmers Livestock Auctions Ltd which offers professional support to farmers in the Exmoor National Park and surrounding areas. Based at Cutcombe Market in Wheddon Cross, Somerset, it helps farmers submit applications for the Basic Payment Scheme, Countryside Stewardship Scheme and other grants.

Gethin Rees, from the business, said: “While we have had recent enquiries from farmers regarding forward, business and succession planning, the numbers have been very small, and it is felt that there is a large proportion of farmers who have not put in place any changes as yet or have not thought about what they intend to do.

“There is a general level of concern about the future with many asking different questions about what grants are available and how can they use them and the other support schemes that may come into effect under the new Environmental Land Management Schemes (ELMS).

“The greatest difficulty is the unknown as ELMS is being developed but no final publication has been made as to what the schemes will look like, and how it will offer a payment for the work or options undertaken. This does make it impossible to offer any certain advice and limits many in how they prepare for the future.

“There are also those who are discussing options to sell the farm in the near future and retire which is perhaps the last resort available.”

The NICRE report has been welcomed by the Department for Environment, Food and Rural Affairs and Strutt and Parker.

Farming Minister Victoria Prentis said: “Our new farming schemes will be simpler, fairer, more proportionate, more accessible and more effective, supporting the choices that individuals make for their own holdings. That’s why we’re working with thousands of farmers across the sector to co-design them to ensure they work for them.

“Engaging in formal business planning is important as farms prepare for future challenges – that’s why our Future Farming Resilience Fund provides free business advice to farmers across England. Over 9,000 businesses have already benefitted from the service, and a final phase targeting a further 32,000 farmers and land managers will be available from October.”

Jonathan Armitage, Head of Farming at Strutt and Parker, NICRE’s business partner, said: “The impact of the removal of 75 years of publicly-funded support for farming activities, massive changes in input and output prices, and the need for different approaches to land management make it even more important for farmers to plan ahead and manage risk.

“The most successful businesses are driven by people who have a clear plan with focused objectives and who welcome engagement with all of their ‘partners’ including staff, customers, plus technical and business advisors.

“In these most challenging of times for UK farming, NICRE’s report is extremely timely and while it demonstrates the concern over regulation, our experience has shown a really encouraging level of enthusiasm and innovation to address the key issues.”

This is the third report to be published by NICRE. Visit the University of Gloucestershire’s research repository to download the report and infographic.