In England, the recent publication of the Agriculture Bill heralds the start of the Government’s clarification of the impact of Brexit on the farming sector. From the information available we know there is significant disruption to come in the way in which land is farmed and managed, and we anticipate a major shift in the occupation of land as a result.
While the Bill will not be enacted in Scotland, we eagerly await the outcome of an inquiry by the Scottish Affairs Committee to understand the extent to which policy will be influenced by Westminster.
Despite the differing policies north and south, opportunities will undoubtedly surface. The resilience of rural estates will be tested, particularly those heavily exposed to farming.
Understanding the performance of rural businesses and being able to benchmark them remains essential in determining strategy to meet the challenges ahead. Our 2018 Estate Benchmarking Survey confirms businesses are continuing to operate dynamically with all asset classes being worked hard.
Across the sectors, gross incomes continue to improve, up 1.2 per cent to £242 per acre on the average English estate and up 10.4 per cent to £164 per acre on Scottish estates. Agriculture and residential property remain the bedrock of rural estates, contributing over three quarters of average gross income.
However, owners have been giving renewed focus to opportunities for diversification, with many privately-owned estates looking to new trading businesses as a source of additional revenue and as a means of managing down the risk of the impact of Brexit on farm incomes. Currently, trading income represents around six per cent and 20 per cent of gross income across the average estate in England and Scotland respectively.
Therefore, there is plenty of room for expansion, and clearly market research is required to help ensure success. But, it is interesting to note that in the UK more people visit heritage properties every weekend than attend football matches.
Cost control is a necessary objective and one temptation may be to cut back on property repairs, which currently stand at 23 per cent of gross income. However, history has shown that such an approach will only impact on future performance, producing a lack of demand for a poor product and the spiralling cost of overcoming years of neglect. It is essential to keep residential stock at a level with market expectations.
There are real challenges ahead, and estate owners will need to watch closely the impact of legislative and regulatory change on their enterprises, and the impact they have on costs and associated income.
Resilient estates will need to adapt and face up to change with a positive attitude while navigating the choppy post-brexit waters ahead.