35% of farmers say the pandemic has had a negative impact on businesses
A survey by Virgin Money highlights the resilience of the farming industry during the Covid pandemic, but also indicates that Brexit remains a big concern for business owners.
In an effort to stay abreast of challenges in the agricultural sector, Virgin Money recently conducted its second Agri Business Survey. The online questionnaire was sent to all their existing agricultural customers in early February 2022. The survey received nearly 300 responses. The aim was to monitor any changes in trends since their 2020 research and find out how farmers are affected by things like the pandemic, Brexit and environmental, social and governance (ESG) factors. The results provide a useful insight into the current state of the UK farming industry.
It is perhaps unsurprising that two years later, 51% of farmers say the pandemic is having very little impact on their business, an increase of 4% from the last survey. However, 35% told the bank that the pandemic continues to have a negative impact, compared to 43% in 2020. Nearly a third of businesses are still struggling with labor shortages, as well as delays in their supply chains.
On a positive note, those who thought Covid had a positive impact on their business rose from 5% to 9%. This is largely due to increased demand from supermarkets, demand for vacation rentals, more people wanting to buy local produce, and direct sales from their own farm shops.
Customers remain worried about the implications of Brexit and awareness of its impact is higher this time than during the last wave of research. Some 43% did not know what the impacts would be in 2020, while that figure fell to 27% in 2022, almost half of whom now expect a negative outcome.
There is much concern about the reduction in support payments and a perceived lack of understanding of the sector by the UK and Scottish governments. Lack of clarity is a key issue, with uncertainty over the future of exports, both to the EU and to new markets, how to deal with labor shortages now that the free movement of the EU has been removed and what impact lower standard imports will have on profit and competition.
“The results of our survey highlighted the concerns of our customers,” said Brian Richardson, head of agriculture at Virgin Money. “Reassuringly, the industry seems to be recovering from the pandemic and it seems to have opened up a lot of opportunities for people to explore other sources of income.”
“In a way, the uncertainty may have forced farmers to look at their businesses with a more open mind, and I hope that will be very helpful for them in the future,” he continued. “However, it is clear that challenges remain for the industry, and we are committed to continuing to support our customers during these difficult times.”
ESG factors are now more on the radar, with employee well-being being the most important, followed by reducing carbon emissions. Although some clients have decided what is important to improve sustainability, not all are convinced that they have the capacity to initiate the ESG process. Only 51% are confident about reducing emissions, 40% about restoring ecosystems and 41% about receiving adequate government subsidies for environmental management. Essentially, most farmers know what areas they would like to focus on, but sometimes they just don’t know how to go about it.
Half of respondents do not expect agricultural policy to change the amount of land they farm in the next three years and less than a third have diversified their business in the past six months, although this represents a 5% increase since the last survey. Those who have diversified overwhelmingly choose vacation rentals, either renovating existing buildings or constructing new ones. Some also become wedding venues or create campsites and commercial warehouses. Others bought new businesses such as butcher shops, a second farm or an on-farm store.
“We talk to our agricultural customers continuously, but this survey gives us a better insight into what farmers are currently thinking,” Brian concluded. “It identifies upcoming challenges and the concerns around them, which ultimately allows us to be ready to step in and support our customers.”
“As we move forward, it’s nice to see that our customers have been happy with the bank’s response throughout the pandemic, and as we head into uncharted territory surrounding Brexit and the loss of BPS,” he added. “This survey means we can fully understand their needs and offer better support.
Of the 300 respondents, 78% had a turnover between £100,000 and £2.5 million, with 25% having a turnover between £1 and £2.5 million. Interestingly, the vast majority (91%) do not export any of their products.
With an eye to the future, this Virgin Money survey has provided good insight into where the sector is heading and highlights the support that agricultural businesses will need to navigate these changes.