The weather has also hampered establishment of the 2024 harvest. Torrential rain in the East of England has either held up winter crops being planted or washed away much that had been drilled. Spring cropping may now be the plan but of course seed costs have increased given demand. The outlook for 2024 harvest is a concern. The backdrop to all of this is the cost of finance. At 6 April 2022 Bank of England base rate was 0.75% and is currently 5.25% as the Monetary Policy Committee grapple with inflation. The era of ultra-low interest rates was likely to end and in my opinion, inflation was inevitable given the money pumped into the economy during the pandemic but few commentators predicted the stark escalation in interest rates that followed the disastrous Kwasi Kwarteng mini budget statement delivered on 23 September 2023.
Farmers with fixed rate debt are insulated but those with variable rates are experiencing a significant increase in debt servicing costs at a time when cashflow is starting to tighten as profits are unwound and some hefty tax bills may be falling due. November 2023 saw UK inflation fall to 3.9%. In April 2022 the rate was 9%, peaking in October 2022 at 11.1%. The recent announcement that the rate reduction is much bigger than expected has led to some commentators predicting that base rate could be reduced to 4% by the end of 2024. Whilst a reduction is welcome, debt servicing will still be significantly more for those on variable rate term debt or operating in overdraft. Strategic decisions may be needed, such as reviewing the term of debt or the sale of noncore assets to reduce debt and make operating cashflows more sustainable.
I do not anticipate major fiscal or legislative changes ahead of the General Election and the coming year will be dominated by political posturing of the main political parties. Consistency of policy and indeed voice of DEFRA whoever is in Government is important for both farmer and adviser to navigate what I am sure will be a year of further challenge. At Scrutton Bland we have a team of specialist advisers who understand the sector and are very well placed to support farmers manage their business. For more information please contact nick.banks@scruttonbland.co.uk, your usual contact or call 0330 058 6559 to find out more.
AGRICULTURE AND FARMING | SCRUTTON BLAND | 5
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