Bank lending to Scottish agriculture down £13 million

There was a slow-down in the total lending from banks to Scottish agriculture in 2018 compared to the year before as lending increased by £22 million – the smallest increase since 2009.

The amount of ‘real term’ lending from banks and mortgage companies to the agricultural sector fell compared to the previous year.

Total outstanding lending to the agricultural sector amounted to £2.34 billion – accounting for inflation, this was a decrease of 0.6% since May 2017.

It marks the first year since 2009 that outstanding debt has not risen in real terms.

When the effects of inflation are taken into account, lending to Scottish agriculture fell by 1% – or £13 million – in the last year.

Lower confidence

The statistics from a survey of the main banks and other lending institutions were released earlier this week by the chief statistician.

Image Source: Scottish Government

Lending is widely regarded as a sign of business confidence and the slow-down this year might suggest hesitation in making investment decisions.

This could be caused by overall weak growth in the economy or concerns that interest rates may rise in the future.

In addition to bank lending, farms have an estimated £1.2 billion of debt related to hire purchase, leasing and other sources.

An estimated 51% of total lending are long-term debts – a percentage that has been slowly increasing over time.

This growth in debt is likely due to restructuring of informal debts to more sustainable repayment loans. Total bank held debt is roughly the equivalent of 10% of assets, a relatively low debt ratio, due to high-value assets.

The data reflects the overall UK picture; figures from the Bank of England showed that, by May 2018, the UK agricultural, hunting and forestry sector had an outstanding debt of £18.75 billion, rising by 1% over the past year. However, as in Scotland, this increase was smaller than in previous years.