2017-04-28 

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How to Prepare for the End of CAP

Few political events in recent times divided UK public opinion like the EU referendum, with passions running high on both sides. But now the decision is made, the time for emotion is over. Brexit is happening, and the country has to prepare itself.

Britain’s farmers have more at stake here than most. When the country leaves the EU in two years time, it will also leave the Common Agricultural Policy (CAP) and its £3.5bn worth of subsidies. No one yet knows what future support for the country’s rural economy will look like.

wheat

In the short term at least, instability looms for farmers. The UK government has been a vocal critic of direct subsidies under the CAP, so we can expect a more liberalised agricultural industry. That will create upheaval, and for sectors with a high exposure to European markets like cereals and dairy, it poses the challenge of competing with still subsidised EU farmers.

Moreover, land prices post CAP are expected to fall, so farmers will have less value in a vital asset for securing finance. And if the pound remains weak, likely in the event that we leave the single market, import prices of important commodities will rise.

So, how can UK farmers and agri-businesses prepare for this major upheaval in their financial circumstances? Here are four tips to get started.

1.   Take advantage of cheap finance

With so much uncertainty on the horizon, now is a good time to take out finance. Finance remains relatively cheap with many favourable terms available, but who knows how long that will last? While you are still sure of your financial situation and before any potential dip in land values, now is the time to invest in facilities and machinery upgrades.

2.   Carry out a business audit

Do you know the full value of all of your assets? Do you know if all of the resources at your disposal are being used effectively? Do you know if your business is performing as efficiently as it could be, or if it is carrying unnecessary costs? Auditing operations so you can get insight in these areas will help you on the path to forging a leaner, more resilient business better equipped to ride out whatever is to come.

3.   Talk to a specialist financial adviser

Unlocking the financial potential of your business is not always easy, so it pays to seek professional advice. Moreover, agricultural finance is a specialist area, and there are schemes and opportunities out there which high street financiers are not likely to know about.

4.   Consider diversifying your business

The end of CAP will affect some sectors more than others. Those which rely heavily on the direct subsidies, such as upland sheep farming, and those like cereals and dairy which are particularly reliant on European markets, would be strongly advised to look at other revenue streams as a fall back option. However, diversification is recommended for all rural businesses. Liberalisation of the markets may cause upheaval, but it will also present new opportunities. Diversification can maximise the use of land assets, and it is a strong possibility that the government’s eventual agricultural policy will favour ‘rural development’ funding over direct subsidies, offering incentives for farmers to innovate.

Peregrine Finance is the UK’s largest provider of asset finance to rural businesses. With more than 25 years’ expertise in the field, Peregrine specialises in providing bespoke financial services to land based industries. To read more about our award winning services, please visit www.peregrinefinance.co.uk

Peregrine Finance

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