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Farmers urged to strengthen financial planning amid economic uncertainty

Farmers urged to strengthen financial planning amid economic uncertainty

Greg Ricketts, Director at GSC Grays, believes farmers should be encouraged to seek expert advice with interest rates remaining high despite a recent reduction in the Bank of England base rate.

The Bank of England recently announced a new base rate of 4.5% —a reduction of 0.25 percentage points—bringing rates to their lowest level since mid-2023. However, the economic outlook remains challenging with the Bank’s governor, Andrew Bailey, revealing the downgraded UK growth forecast for 2025 is now projected at 0.75%, down from 1.5%.

Government statistics released in December 2024* highlighted the increasing financial strain on the sector with average farm liabilities reaching £294,600 in 2022/23 – an 8% increase from the previous year.

The debt burden currently carried by farm businesses remains a concern for the industry. Greg said “Despite slight rate cuts, elevated interest rates continue to exacerbate debt concerns.

“While overall inflation in agriculture fell by 3.9% in the year to November 2024 (source Defra) largely thanks to lower oil and livestock feed costs, essential expenses such as veterinary services and equipment maintenance continue to rise.

“While a small interest rate cut is good news, the broader economic conditions suggest further rate reductions may be slow to materialise. We are unlikely to see rates fall below 4% this year due to slow economic growth, rising inflation, and global trade uncertainties, including new US tariff policies.

“That is why farm businesses need to adopt a strategic approach to ensure they are squeezing gains out of all the available margins.”

Against this economic backdrop farm businesses continue to face significant pressures and Greg stresses that now, more than ever, it is crucial for farmers to stay well-informed and equipped with the right knowledge.

He explained “It is vital for farmers to implement key strategies, including budgeting and benchmarking, to gain a clear understanding of production costs, especially as reductions in direct subsidies make precise financial planning more critical than ever.

“Farm businesses can ‘control the controllables’ to help mitigate the impact of external challenges such as weather, government policies, and global market shifts. This involves managing production costs effectively, adjusting enterprise mix and farming systems, engaging with Environmental Stewardship schemes and strengthening financial planning through budgeting and forecasting.”

Greg believes benchmarking has never been more important with top-performing farm businesses continuing to adapt and thrive even in challenging times. “In my experience, successful farm businesses share common traits,” he added. “These include minimising overhead costs, setting clear financial goals and budgets, benchmarking against industry standards and staying informed on market trends.”

Greg Riketts - GSC Grays

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Greg Ricketts
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