Planning for a successful farming future

Brian Richardson, UK Head of Agriculture for Virgin Money, discusses how to plan for your farm’s future:

For farmers, the last five years have been challenging. Firstly, Brexit meant replacing CAP which had governed UK farming for fifty years. Whilst there were some issues, the policy had provided farmers a background they could plan around. New policy to replace this has been slow to evolve and has created significant change to the income of many farms.

At the same time the focus in agriculture has moved to Net Zero. Whilst agriculture accounts for 10% of total carbon emissions, being part of the solution to reducing UK carbon output has meant a close focus on farming. We have also endured Covid, in which UK farming did a fantastic job keeping food supply chains working.

A war in Ukraine is the latest challenge, with energy costs affecting all farming businesses, and input cost inflation spiralling. This uncertainty makes planning difficult, with many farmers having little option but to continue as before in the hope something will turn up in relation to price.

UK farming is resilient, and the skills and dedication of farmers has come to the fore in recent years. The UK’s proportion of income spent on food is the third lowest in the world, despite producing high-quality food which is excellent value for money.

So, what will the next five years look like, and what can farmers do to ensure future profitability and successful?

The direction of new policy is clear. Recent events have refocused the economic importance of food production, and the environment and Net Zero being seen as complementary to that food production. There are available grants targeting productivity and improving efficiency, I suspect rising as the debate between environmental security and food supply rebalances.

So how do you plan through this uncertain landscape and start to make real decisions for your business?

Budgets, cash flow forecasts, and benchmarking have never been more important. Yes, forecasting is difficult, but understanding what the future looks like is crucial so you can be proactive and not reactive to events.

‘Deep diving’ into your business is invaluable in helping you understand where investment may be beneficial. Involving advisors helps with objectivity, taking some of the emotion out of those future decisions.

Given the focus on Net Zero it is advisable to conduct a Carbon Audit. This will highlight areas for mitigation, which will likely compliment efficiency and productivity improvements aiding the bottom line.

There are grants available for these reviews. Advisors will have first-hand knowledge of other farms, so can advise on how your performance compares and what they see working elsewhere.

At Virgin Money we recognise farming is a long-term industry and look to continue to support the sector in the future. That is easier when we have a clear understanding of a farm business approach to the current changes and understanding the actions you are taking to future proof your farm.

I am positive about the future of farming, but it is going to be different. We look forward to working with our farmers and the wider professional community to support the sector going forward.