The Agricultural Industry may have taken some comfort (or not!) given DEFRA Secretary Michael Gove’s surprise announcement that the draft Agriculture Bill would be published before the Summer Recess, however unsurprisingly this has now been delayed and is now due to table in September , adding to the uncertainty over future business plans.
It is still not clear what level of detail on future policy the Bill will contain. It is more likely to be a framework into which the details can be added later by Parliament. It is unlikely to set out exactly the timetable for phasing out direct payments, there will be an ‘agricultural transition’ period, but Mr Gove is being lobbied hard to make the future direction of policy clear so that the industry can make plans.
The new arrangements for farm support in England after Brexit, are according to DEFRA likely to be an Environmental Land Management (ELM) Scheme, this will be a replacement for BPS (Basic Payment Scheme) and will encompass the present role of Countryside Stewardship. It will most likely be a whole-farm plan-based system and will be designed to reward and incentivise farmers for what they do, and not to subsidise them for what they have lost. The support will not be based on the amount of land a farmer owns, but by rewarding them for helping the environment, and will cover other aspects of the business such as recreation, forestry, water quality and measures to improve agricultural efficiency. Farmers will effectively be given a ‘price’ for work they carry out based on a DEFRA ‘price list’. DEFRA will then outsource the assessment and auditing of the quality of the work done.
The future of international trade for agri-goods also remains a key area for concern. The resolution of UK’s future trading relationship with the European Union is of huge importance to the agri-food sector, EU countries being the biggest export market (57% of the UK’s Food & Beverage exports in 2017 were to the EU), and 95% of UK sheep meat exports for example, go to other EU countries. The Government has set out its intention to seek tariff free access to the European market and frictionless borders, offering the EU the same access to the UK market.
Whatever the outcome this is an uncertain time. Combines are currently rolling across the country taking advantage of this dry weather, but farm incomes are predicted to be lower than 2017, due to lower yields following the wet spring and early summer droughts, and the increased price of oil resulting in higher input costs. Pressure on cash flow may result in extra funds being required.
Please contact us at Minford Walker if you would like to talk about cash flow planning and/or corporate financing of future working capital.