Farmers could see their profits wiped within three years as the Basic Payment Scheme is phased out between 2021 and 2028. The cut of subsidies is just the beginning of a decade of major change within the agricultural sector, with challenges surrounding Brexit, climate change, and labour shortages.
The complexity of the replacement system and differences in regulations between Scotland and England makes navigating the way to maintaining a profitable business even more challenging for farmers. We encourage farmers to regain control and break down the financial elements of every enterprise within their business. This will allow them to make informed and proactive decisions to safeguard their farm for many years to come, no matter the uncertainty from subsidised income or environmental schemes.
Our Director of Agriculture, Victoria Ivinson, would urge farming clients to follow three critical steps which will help them to gain a deeper understanding of their business position and learn how to adapt their business before government support is changed or removed.
Victoria said: “For many farmers, these subsidy payments prop up the business. Our estimate is that at least 50% of farmers could see their profit wiped out. While most may break even, many will be running at a loss once the subsidies are cut. That is a horrifying prospect.”
“We can help farmers to get in front of this now. By facing up to difficult questions, making proactive changes, and planning ahead, they can secure their farming future. The hits will keep on coming as environmental regulations ramp up – getting fit for purpose now is essential.”
Three Steps to adapt to farm support change
Step one: Understand your current financial position
Our seven-strong agricultural team can help farmers understand their numbers, breaking down:
- Gross & net profit from each income stream
- Your break-even point
- Your labour and wages cost
Our advisors will help clients understand the profitability of each individual farm enterprise. This is a crucial step as many farmers continue with the same mix of livestock and arable business streams even when one may be more profitable or time-efficient than the other.
Step two: Bridge the gap
Carefully assess ways to bridge the income gap when farm support payments are removed.
Farmers can make use of free advice funded by Defra’s Future Farming Resilience programme and support provided through the Prince’s Countryside Fund. We are also certain that additional environmental schemes will be in the pipeline over the coming years.
Step three: Adapt your current farming practices
Our team can advise on taking proactive action to adapt your current farming practices to be profitable, this could include:
- Reduce or remove enterprises that are not profitable
- Adapt current enterprises to take advantage of available schemes
By this stage in the decision-making process, you should feel more empowered to make big business decisions whether that be scaling up or down, or diversifying into an entirely different field, as you will have a clear understanding of the benefits of each action.
For proactive and forward-thinking accountancy and tax advice as well as specialist knowledge about the withdrawal of the Basic Payment Scheme, please contact Victoria on [email protected] or call 01573 225082.