Scots farming debt hits a record high
Farming debt in Scotland has hit a record high with the amount of money owed to banks up 5 per cent over the past year.
At the end of May 2017 a total of £2.32 billion was owed by Scottish farms, a rise of £113 million on the previous year and the eighth consecutive annual increase. Debt levels have risen to their highest since records began in 1972. The figures come after problems with an IT system caused delays in subsidy payments.
Total outstanding loans to Scotland’s agricultural sector have risen by £113 million over the past 12 months, an increase of 5 per cent, to a record figure of £2.32 billion, official statistics revealed yesterday.
The figure, which marks the highest level of indebtedness since records began 45 years ago, marked the eighth successive year of rising debt for the country’s farmers after a relatively stable period through the early noughties.
However, this amount still excludes an estimated £1.1bn of additional liabilities which are also carried by the industry through hire purchase arrangements, leasing, and loans from family members and from other sources
The Office of National Statistics publication also shows that about 50 per cent of total liabilities are currently in the form of long-term loans, a percentage that has been slowly increasing over time.
The data mirror the overall UK picture, with Bank of England figures showing that the UK “agricultural, hunting and forestry” sector had an outstanding debt of £18.5bn.
But mixed messages 0 Scott Walker highlighted lack of farming profitability were being put forward by industry sources over whether the increased borrowing reflected a sector confident enough to invest for the future – or one simply struggling to cope with low incomes.
Terming the figures “bad news”, NFUS chief executive Scott Walker said the level of indebtedness underlined the lack of profitability across all sectors of farming.
“Food and drink is Scotland’s largest manufacturing sector and requires a strong farming sector,” he said. “We need to forge a new partnership between farming and the rest of the food and drink supply chain. There is ambition to double the size of Scotland’s food and drink industry by 2030. Without successful farming this will never be achieved.”
Roddy Mclean, director of agriculture at the Royal Bank of Scotland, said the figures echoed his bank’s experience: “This has in part been driven as businesses invest in new technologies and further diversification, while the weakness in sterling through Brexit has helped push sales. In our experience, almost every area has enjoyed growth and upturn in performance this year.”
He said that it was important that banks continued to offer support to the farming sector to help deliver investments which would allow farmers to increase productivity, make efficiency gains and help future-proof their businesses.
Rural economy secretary, Fergus Ewing said that it was vital that Scottish farmers had continued access to capital to invest in their businesses.
“These statistics show that banks are still lending to farmers, which is a sure sign of confidence in the sector.”however, he added that with many farmers relying on subsidies for a large part of their income, farmers should be wary of getting into excessive and unmanageable debt.