UK farm income suffers 'staggering' 29% fall

PUBLISHED: 07:48 29 April 2016 | UPDATED: 17:01 29 April 2016

UK farmers have seen their profits squeezed by a number of factors.

UK farmers have seen their profits squeezed by a number of factors.

The total income from UK farming fell by a "staggering" 29% in 2015, with a loss of more than £1.5billion, according to figures released by the Department for the Environment, Food and Rural Affairs (DEFRA) yesterday.

The drop represents the biggest year-on-year fall since the millennium and latest official statistics shows that farming profitability is at its lowest level since 2007, highlighting the cash flow crisis facing the agricultural industry, says the National Farmers’ Union (NFU). It fell by £1,526million in real terms, to £3,769m.

Farmers have been hit by a combination of factors, including higher production around the world, subdued demand due to slowing economies, the strength of sterling in 2015 and more than 24 months of falling farm gate prices across the sectors.

DEFRA said that although farmers enjoyed record yields, low commodity prices followed due to increased production globally. Added to this, the pound further strengthened against the euro in 2015, reducing the value of direct payments - or farm subsidies - to farmers. It is estimated that the value of Basic Payments (formerly Single Farm Payments) were 7.5% lower in 2015 than in 2014 as a result. Labour, rent and interest rises further contributed to the overall fall in total income from farming.

For many, the cash flow impact has been exacerbated by delays in the delivery of Basic Payment Scheme (BPS) farm subsidy payments, with many farmers still waiting to receive their advance payments, the NFU said.

NFU chief economist and international affairs adviser Gail Soutar described the figures as “alarming”.

“They remind us that farmers up and down the country and across the majority of sectors are dealing with the impact of devastating cuts in the value of their products. Lots of farm businesses find themselves in a loss-making situation. If prices and profitability don’t change, it is not just those farms that are at jeopardy, but our food processing sector, our rural communities and the environment.

“The numbers must serve as a wakeup call to others in the supply chain and government. We need everyone in the food supply chain to intensify their efforts to back British farmers. For example we need longer term relationships that deliver some certainty on pricing and give farmers the confidence that food production can be profitable. And we need government to do all it can including making sure that farmers don’t face the same crippling delays to farm payments that they have in 2015, with immediate action for those still waiting for 2015 payments to arrive.

“The latest NFU farmer confidence survey of its members has this week also confirmed that both short and medium-term confidence has fallen to the lowest level since this six monthly survey began in 2010.

“Profitability and industry confidence are closely related. That confidence also impacts investment levels in the agri-food supply chain, and indirectly on jobs and economic growth. The effects of the downturn in farming profitability are not just confined to the sector itself but will also have a knock-on impact on the wider economy and rural communities.”

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