16 April 2022

4 minute read

By: Global Ag Media

Europe

A survey conducted by Virgin Money highlights the resilience of the agricultural industry through the Covid pandemic, but also indicates Brexit is still a big concern for business owners.

In an effort to stay on the pulse of challenge within the agricultural sector, Virgin Money recently carried out its second Agri Business survey. The online questionnaire was sent to all their existing agricultural customers at the beginning of February 2022. The survey received nearly 300 responses. The aim was to monitor any changing trends since their 2020 research and find out how farmers are being affected by such things as the pandemic, Brexit and Environmental, Social and Governance (ESG) factors. The results provide a useful insight into the current state of the UK farming industry.

It is perhaps not surprising that two years on, 51% of farmers report that the pandemic is having very little impact on their business, an increase of 4% from the last survey. However, 35% told the bank that the pandemic continues to have a negative impact, down from 43% in 2020. Almost a third of businesses are still struggling with labour shortages, as well as delays in their supply chains.

On a positive note, those who thought Covid had had a positive impact on their enterprise has gone up from 5% to 9%. This is largely driven by increased demand from supermarkets, demand for holiday lets, more people wanting to buy local produce and direct selling from their own farm shops.
Customers remain nervous about the implications of Brexit and awareness of its impact is higher this time than in the last wave of research. Some 43% didn’t know what the impacts would be in 2020, whereas this has dropped to 27% in 2022, with almost half now expecting a negative outcome.

There is a lot of concern about reduced support payments and a perceived lack of understanding of the sector by both the UK and Scottish governments. An absence of clarity is a key issue, with uncertainty over the future of exports, both to the EU and new markets, how to deal with labour shortages now that the EU’s Freedom of Movement has been withdrawn and what impact lower standard imports will have on profit and competition.

“Our survey findings have highlighted where our customers concerns lie," said Brian Richardson, head of agriculture for Virgin Money. "Reassuringly, the industry seems to be making a good recovery following the pandemic and it appears to have opened up a lot of opportunities for people to explore other income streams."

"In some ways, the uncertainty has possibly forced farmers to look at their businesses with a more open mind, and hopefully this will stand them in good stead for the future," he continued. "However, it is clear that challenges remain for the sector, and we are committed to continuing supporting our customers through these difficult times.”

ESG factors are now more on the radar, with the wellbeing of employees being of most importance, followed by reducing carbon emissions. While some customers have decided what is important to improving sustainability, not all of them are confident that they have the capability to get the ESG ball rolling. Only 51% are confident about reducing emissions, 40% about restoring ecosystems and 41% about receiving government subsidies tailored towards environmental management. Essentially, most farmers, know what areas they would like to focus on, but sometimes they just aren’t sure how to go about it.

Half of respondents do not expect agricultural policy to change the amount of land they farm in the next three years and less than a third have diversified their business in the last six months, although this is a 5% increase since the last survey. Those who have diversified are mostly choosing to rent out holiday lets, either by refurbishing existing buildings or constructing new ones. Some are also becoming wedding venues or creating campsites and commercial storage. Others have bought new businesses such as butcheries, a second farm or a farm shop.

“We are continually talking to our agri customers, but this survey gives us more insight into what farmers are thinking about in the present," Brian concluded. "It identifies the challenges ahead, and concerns that surround these, which ultimately allows us to be ready to step up and support our customers."

“As we move forward, it is pleasing to see that our customers have been happy with the response of the bank throughout the pandemic, and as we move into unknown territory surrounding Brexit and loss of BPS," he added. "This survey means we can fully understand their needs and offer greater support.”

Of the 300 respondents, 78% had a turnover of between £100,000 and £2.5 million, with 25% having a turnover of between £1 – £2.5 million. Interestingly, the vast majority (91%) do not export any of their products.

With an eye on the future, this Virgin Money Survey has provided a good insight into the direction of travel for the sector and highlights the support agricultural businesses will need as it navigates these changes.