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The latest annual survey carried out by Virgin Money highlights growing concern in the UK Agri industry over input costs, which may cut production as a result.

Underlining their deep long term commitment to the UK agricultural industry, in 2020 Virgin Money initiated their first annual survey to sound out the views and concerns of their farming customers. The profound effects of a turbulent few years of major change for the UK agricultural industry are reflected in the responses to the recent third annual survey, summarised here:

The survey was carried out with an online questionnaire sent to all Virgin Money agricultural customers in April and June this year. Over 300 responded to a wide range of questions covering key current issues including the impact of Brexit, new UK farming policy, input cost inflation, and how these factors might affect future plans for farming businesses.

Brexit remains a major issue for UK farmers, with just 6% of respondents feeling that leaving the EU has had a positive impact and 50% reporting it was negative for their business. There were significant regional differences in the reported impact of Brexit, with 58% anticipating new agricultural policy to affect them negatively in Scotland whilst that figure rose to 86% in England.

Looking forward, 37% of Virgin Money farming customers felt that UK agriculture would be worse off as a result of Brexit over the long term, and just 16% believed prospects for farming would be better. 20% of farmers cited increased costs, with 19% anticipating less industry support and 17% mentioning labour shortages.

With a growing focus on net zero and the natural capital agenda, the survey reports half of businesses have carried out a carbon audit, but there is a significant difference between England and Scotland with just 38% in England and 61% in Scotland. Over a quarter (26%) of those customers surveyed have been asked by suppliers to show evidence of their efforts to reduce emissions.

Despite much talk of the development of tree planting on farms, there was actually a drop in the year of those intending to plant trees, down from 43% to 39%.

The industry’s bounce back from Covid appears to be continuing, with 71% of respondents saying they are no longer being impacted. Although 40% did indicate that Covid had some negative impact on their business – mainly costs, labour shortages and disruption to supply chains – only 6% described the impact as severe.

A massive 82% of farmers believe that higher input costs had not been reflected in higher farm gate prices. 24% of respondents said they were very likely to cut production if prices do not represent those higher input costs more fairly, and 47% said they will consider it.

In response to questions concerning technology and investment funding, the Virgin Money survey found that 51% of farmers have made investment in their business in the last 12 months, versus only 34% who anticipated investing next year, perhaps indicating some uncertainty from farmers as to the economic landscape ahead. Over a third of that potential investment (38%) will be subject to securing some form of grant support.

Areas of investment remain focused on automation and equipment at 67%, followed closely by precision farming at 55% and a third of those respondents planning to invest looking at renewables. Diversification continues to be a fundamental strategy for farmers with 26% having created some diversification in the last 12 months, slightly down on the year before, with tourism being the main focus, taking advantage of the growth in staycation holidays.

When it came to the future, more than 1 in 5 (22%) farming customers have considered leaving the industry, principally due to age, proximity to retirement and lack of succession as the main reasons. The 78% who said no to leaving the industry were committed to the sector citing job satisfaction, family heritage and the next generation as reasons for their continuation.

Brian Richardson, Head of Agriculture at Virgin Money, thanked all the bank’s farming customers who responsed to the survey: “This annual survey provides us with great insight into our farming customers’ thinking, their concerns and plans, and it also demonstrates the profound resilience of the sector. Despite the challenges of Covid and the slow emergence of policy post Brexit, the majority of farmers are still focused on the future and looking to do as good a job as possible. What stands out from the responses this year is the challenge for farmers of not being able to pass on higher input costs, and the potential squeeze that will have on farm incomes in the coming year.”

“From the number and detail of the responses we can see the importance of having clarity on new support policy and how that will be funded going forward. Farming is a very long term industry and it is critically important farmers can make long term plans to future-proof their businesses.

“The survey gives us an invaluable window on the industry we serve, and I am very grateful to all our customers who took the time and trouble to complete the questionnaire. It is a huge help to us in planning how we can best support our customers going forward and where their investment focus will be. I remain very optimistic about the sector but the coming years will clearly be challenging and once again I would urge every farmer to look hard at their business, talk to their advisors, and create a plan to deal with the changes that are coming.”

Full details of the survey can be found here: agriculture-survey-2023.pdf. Link opens in a new window

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