Brexit fuels uncertainty as agribusiness prepares for life outside Europe

Neil Steven

Neil Steven

Business Advisory Partner

Landowners and tenant farmers across Scotland’s diverse agricultural sector believe that selling prices, input costs and Brexit will have the biggest impact on agribusiness over the next 12 months, according to the results of our recent survey.

Responses to Johnston Carmichael’s annual agricultural questionnaire revealed that farm businesses are preparing themselves for the changing landscape, foreseeing negative impacts from the UK’s exit from Europe, with uncertainty surrounding Brexit negotiations doing nothing to calm an already challenging business environment.

However, while the overall effect of the UK’s eventual disengagement is still unclear, the sector does see the potential removal of red tape associated with EU membership as a potential benefit.

From those surveyed, opinion is split on where national policymaking decisions should be made – 37% believe Westminster should hold the reins, with 36% believing power should rest at Holyrood. The remainder are content with either solution, though it should be noted these figures pre-date the hung parliament outcome of the recent UK General Election.

Neil Steven, partner at Johnston Carmichael, said: “The Scottish agricultural sector remains very important to the national economy, as an income generator in its own right and as a source of income for associated industries such as beer and whisky, dairy products and abattoirs."

This year, Brexit has emerged as a key concern for farmers. Taken in context of the changes to come, they have concerns over negative impacts related to subsidies, input costs, staff availability, land values and selling prices.

Neil Steven

Business Advisory Partner

The survey revealed that overall, in general terms, farmers’ and landowners’ outlook for the year ahead has technically lifted: In 2017, some 35% of respondents had a positive outlook, and 15% negative, which compares favourably to 19% and 54% last year.

Neil Steven commented:  “Additional income sources have helped to bolster the sector somewhat, principally through renewables sited on agricultural land generating rental income for the landowner and, more recently, through redeployment of farming assets as plant and machinery.”

However, half of the agribusiness population remains unsure of what the future holds.

Initiatives such as the Government’s ongoing plan to make tax digital, whereby all accounting must be done electronically, will impact the sector - which remains largely a paper ledger-focussed industry – in a very significant way.

The survey found that nearly a third of those surveyed are unaware as to whether their book-keeping arrangements produce the necessary information, with nearly a quarter already sure they need to make changes to their accounting arrangements.

Any possible delay to the implementation of enforcement of digital tax would be accepted with open arms – 12% of respondents have said they don’t want to change the way they handle their accounts despite having acknowledged their existing systems don’t make the grade.

Looking to the longer term, there has been a slight increase in the number of farm businesses confirming they have a succession plan in place – up to 47% from 45% last year.

Neil Steven said: “Given the ageing demographic responsible for running much of the sector, with 59% of respondents to the survey over 51, the number without that future plan in place remains worryingly high.

“The sector and its financiers need to consider how businesses could be structured and operated to better accommodate diversity in capital ownership, giving a younger generation the opportunity to get a footing within the industry.

“They have the ideas, energy and aspirations to make a career within the industry, but not necessarily the financial capability to make the upfront capital investment required to convert that enthusiasm into operational success.”

Find out more about the work of the Johnston Carmichael team on our dedicated Agriculture page.

An overview of our survey results