Agribusiness, natural capital, and renewables: Saffery’s expert insights
Our specialists share their perspectives on current trends, agribusiness opportunities, natural capital, and renewable energy projects.
The agribusiness sector is undergoing rapid transformation. Climate change is an ever-present concern, requiring rural businesses and farmers to adapt their practices and change their business models to remain competitive, profitable and keep pace with the journey towards net zero.
The climate itself is one of the industries core challenges. Changing seasonal weather patterns are frustrating growing seasons and impacting yields and production.
Regenerative agriculture is a core focus of the industry and good traction is being made with regenerating soils and ensuring that horsepower is removed, and the ground and soils are not overworked. However, the pertinent issue that remains a distant topic from governmental agendas is food security. The NFU reported in August that if, as a nation, we were to survive on domestically produced food only from 1 January, we would have exhausted rations by the middle of August.
This is a stark reminder of the importance of self-sufficiency; however, one must wrestle with the environmental targets set by the government, which will ultimately remove land out of production and reduce food production further.
The battle for water will be ever critical as temperatures increase and alongside this, the cost of machinery and labour are only going in one direction.
How has technology impacted the agribusiness sector?
The impact has been huge and most rural businesses are tech enabled and driven by data and core production data. Increased investment in Farm-Tech and Research & Development has helped the advent of data driven decision making, streamlining operations and improving productivity.
Farming however remains labour and machine intensive and as previously noted, the cost of purchasing and maintaining high tech machinery is not slowing. We help our clients by maximising available reliefs such as capital allowances and R&D tax credits. This can help alleviate an element of the financial burden of investment but agribusinesses still require constant cash flow modelling and ‘no surprises’.
What are some common financial pitfalls and how can rural businesses avoid them?
Cashflow management is critical to rural businesses. These businesses are often carrying debt and therefore careful treasury management is hugely important to ensure covenants are met, debt is serviced but also profitability remains at a level such that investment can be made and families can also take their own ‘pay and rations’ – an element often not considered by most.
Labour is critical and the local market is in short supply. Most agribusinesses rely on seasonable, overseas labour forces that are willing and accepting of the harsh realities of manual labour. It is not uncommon for agribusinesses to charter planes to secure and deliver their seasonal workers in order to ensure labour demands are met during the busy harvest seasons.
As ever, meticulous budgeting, diversifying income streams, and disciplined debt management are crucial.
Any top-level strategic advice for new rural businesses looking to scale their operations?
Knowing your product and USP is critical but having clear financial data is key for decision making and identifying your direction of travel. Working collaboratively with professional advisers, banks and neighbouring businesses can be crucial and there is a lot to be said for pooling resources, labour and machinery.
Do you know of any businesses that have successfully integrated the above?
The Herefordshire-based crisp business, Two Farmers has experienced significant growth in recent years by strategically implementing innovative business practices, but more importantly have stuck to their core values as a sustainable business while doing so. You can read more about their recent growth and expansion into cider-making, in collaboration with neighbouring farms, on Page 8.
What role do professional advisers (like ourselves) play in helping rural businesses on their journey?
We support many rural businesses and landowners across the UK by being their trusted advisors, providing financial and tax planning advice to help them navigate complex challenges and make informed decisions but we act a strong sounding board, providing challenge and support in equal measure.
It’s especially important to seek advice if you’re considering implementing diversification strategies or need help with succession planning, to best ensure the long-term sustainability of your business.
What lessons can other businesses learn from these examples?
Those that have successfully integrated technology, financial planning, and community engagement into their operations have demonstrated remarkable growth and resilience and positioned themselves for long-term success.
Remember that you don’t have to weather the storm alone – whether that’s through professional advice or engaging with your community and other like-minded businesses.
Saffery LLP is a member of Nexia a leading, global network of independent accounting and consulting firms. Please see https://nexia.com/member-firm-disclaimer/ for further details.
Copyright | Legal | Modern Slavery Act Statement | Privacy Policy | Cookie Policy