Up to 50% of UK farms face having profits wiped out within three years due to subsidy cuts.
That is the stark warning Victoria Ivinson, a rural business accountancy expert and farm owner, has issued.
As a result, she said this would leave many facing “incredibly challenging” times – unless they take action soon.
Her firm – the £4m-a-year, 70-strong Douglas Home & Co – has more than 1,000 farming and rural business clients. She said the sector has never faced such challenges.
She has urged under-pressure farmers to seek immediate help to weather a subsidy shake-up that is “likely to herald the start of big changes to modern farming”.
Subsidy cuts
With subsidy cuts at the forefront of a cash, labour and environmental triple whammy, financial specialists stressed that farm owners and operators cannot afford to “stick their heads in the sand”.
Victoria Ivinson, head of the agricultural team with tax and accountancy firm Douglas Home & Co, said:
“For many farmers, these subsidy payments prop up the business.”
“We estimate that at least 50% of farmers could see their profit wiped out.”
“While most may break even, many will be running at a loss once the subsidies are cut. That is a horrifying prospect.”
“At the moment, this money is essential to help them smooth out the challenges posed by major weather events, fluctuations in yields and grain prices and many other unpredictable variables.”
The firm based its stark assessment on its decades-long experience. More than 1,000 of its 3,100 clients operate as rural businesses.
Phasing out BPS
As part of Brexit, the UK government is phasing out the Basic Payment Scheme between 2021 and 2028.
According to the firm, farmers could lose between 50-70% of their subsidy by 2024. It warned that deeper cuts and further changes will also continue “well beyond” 2024.
Victoria, whose husband is a sheep and beef farmer in Penrith, Cumbria, added:
“We are entering a decade of massive change across farming and the rural economy.”
“Brexit, climate change and major labour shortages are already causing sleepless nights.”
“Yet, subsidy cuts are an even bigger threat to survival, particularly for those with no other income stream or alternative financial support. Frankly, some farmers are terrified.”
The accountant said the complexity of the replacement system “overawes” many farmers. The government has not fully fleshed this out or explained this.
Regulations also differ slightly between Scotland and England; however, all UK farmers face similar prospects.
Another common problem is that many are unaware of which parts of their business are profitable and which are not.
Three-step plan for survival
Victoria’s team of dedicated agricultural experts have drawn up a three-step plan to help farmers make the difficult decisions needed for survival.
She added: “We can help farmers to get in front of this now.”
“By facing up to difficult questions, making proactive changes and planning ahead, they can secure their farming future.”
“The hits will keep on coming as environmental regulations ramp up – getting fit for purpose now is essential.”
Step one sees Douglas Home & Co’s agricultural team helping farmers understand their numbers. These include labour costs and profit and loss across different aspects of the business. This allows farmers to understand the profitability of each farm enterprise.
Step two involves carefully assessing ways for struggling farms to bridge the income gap.
However, step three is the most crucial part, as the team can help farmers discuss how to adapt particular enterprises, so they are more profitable.
Alternatively, they can suggest proactive diversification opportunities to broaden the number of income streams to the business.
More government regulations
Victoria added: “It can be challenging to change long-standing farming practices, particularly for those who are passionate about traditional methods.”
“In some cases, farmers may need to move away from old enterprises and embrace a new farming mix. However, this ability to adapt and change can help a business survive during such uncertain times.”
“Starting now is vital because this is just the tip of the iceberg. We are in the midst of a climate emergency, which means more government regulation is coming.”
“Acting now could help farmers reduce the sting for years, if not decades to come,” she concluded.
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