UK farmers warned to act now to make resilience plans

A leading UK farm consultant is warning farmers to make plans now to replace lost income from the Basic Payment Scheme and make the most of grants and alternative funding sources to support their business.

In a funding and grants webinar organised by the RABDF, farm consultant Simon Haley said in five years from now when BPS payments start to drop off the cliff, farmers need to plan for what they are going to do.

“£79,700 is the average income on a dairy farm. But when you look at how that is made up a significant chunk comes from the BPS and that is propping up their income,” he said.

Haley explained farmers are going to need to enhance income from their core farming business, such as milk sales, young stock sales and culls.

This will require farmers becoming more efficient and concentrating on costs, as well as planning and tapping into opportunities available now to help with focus on productivity and diversification.

He said the first thing farmers need to do is stress test their business to see how resilient it is. This can be done by playing out different financial scenarios such as the impact of any losses due to poor weather and milk price cuts.

Haley highlighted that an all-year-round calving herd in the top 25% made 12.6p/L more margin than the bottom 25% and their costs were 10.5p/L lower.

“Chasing turnover is not the only way to increase profit, equal emphasis should be put on reducing costs also. Think margin, not yields and focus on the cost of production,” he added.

Haley also encouraged farmers to capitalise on grants now before it was too late.

“If you are planning on doing any concrete work, hedging, stonewalling and tracks, for example, then apply to do it now.

“The Countryside Stewardship Scheme can help fund these sometimes up to 100% of costs covered.

Although it is a postcode lottery as to whether you are in a high priority area, do not wait five years to look as they might not be available then – take advantage of them now.

Simon Haley’s 16 top tips

Haley also outlined other 16 key steps farmers could take to help their businesses be more money savvy. They include:

  1. Bounce bank loans scheme: Between £2,000-£50,000 available for businesses, capped at 25% of their 2019 turnover. No capital or interest repayments needed in the first 12 months and then a low 2.5% interest rate to follow.
  2. Defer any VAT payment due until March 31, 2021;
  3. If you are a dairy business with holiday lets or tourism-focused enterprises, then you might be able to access some of the Covid-19 grant funds offered through your local authority.
  4. Enterprise Answers: This is a rural community funding development institution providing an alternative form of finance.
  5. Self-employment income support Scheme: Available for sole traders and members of a business partnership to qualify for;
  6. Job retention scheme for employees: Limited company directors are eligible for salaries paid through PAYE but not on dividends;
  7. Claim back statutory sick pay if any employees have been off ill or had to self-isolate because of Covid-19 symptoms or family members affected;
  8. Ask for a capital and or interest repayment holiday on any loans you have;
  9. Ask for a temporary overdraft increase;
  10. Review and restructure existing debts if possible – there has never been a better time to borrow money at a cheap rate;
  11. Ask for a repayment holiday on your hire purchase agreement;
  12. Prepare cash flows and budgets to support justification for any loans and grants and stress test for future scenarios;
  13. Benchmark regularly against similar enterprises;
  14. Go back to suppliers and review costs. Try and get better payment terms;
  15. Buy in bulk or larger volumes and stretch payments out;
  16. Work together by machinery sharing, inputs purchasing, enhanced collaboration with neighbours.