Uncertainty hits buoyant business confidence

Adam Bedford_43411

With just eight months to go before Britain leaves the EU, a survey of Yorkshire’s thriving farm and agri-food businesses shows a current positive outlook is set to fall significantly post Brexit.

The survey, carried out by the NFU in the North East as part of its Pride and Provenance campaign, shows that while today 71% of farmer respondents and 82% of food, drink and wider supply chain companies surveyed are very or fairly positive about their business prospects, this drops to just 37% and 51% respectively once outside the EU.

The findings were unveiled on the first day of the Great Yorkshire Show (Tue 10 July) – when the whole industry comes together to showcase the quality and diversity of what is produced in England’s largest county.

The importance of the agri-food sector to Yorkshire was the driving force behind the launch of the NFU’s Pride and Provenance campaign, which aims to emphasise the huge contribution it makes to the regional economy. The campaign now represents 83 companies that collectively turn over £3 billion and employ 25,000 people, as well as driving exports, boosting the market for artisan food products and managing a vast and beautiful landscape that underpins the region’s multi-million pound tourism industry.

“The importance of agri-food to Yorkshire is undeniable, but with huge change on the horizon, we wanted to take a snapshot for this, the last Great Yorkshire Show before Brexit, to see how the sector is faring, how it is preparing for change, and how we can help ensure the most positive business prospects as we enter the unknown,” said Adam Bedford, NFU North East Regional Director.

“It is great news for Yorkshire that current business confidence is so high and it is perhaps not surprising, given the uncertainty surrounding Brexit, that confidence takes a knock as things progress. But we are very concerned that beyond next year the number of farmers with a positive outlook almost halves and the number of companies feeling optimistic drops by more than a third.”

Adam Bedford

Issues affecting confidence

Asked to indicate the key issues affecting their confidence, 49% of farmer respondents said their most pressing issues were related to uncertainty and volatility - in terms of business costs and farmgate prices. Other key issues included future trade regime (8%); labour supply/retention (8%) and cashflow/profitability (8%). Uncertainty over what a domestic agriculture policy will look like is reflected with 11% citing uncertainty over future support as a pressing concern.

For companies, the top two issues were skills/labour availability – cited by 31% of respondents and consumer confidence/falling demand – cited by 18% who questioned whether people may be less willing to spend post Brexit.

Steps being taken to make businesses more resilient

The survey also asked respondents whether they have changed anything to make their business more resilient ahead of Brexit. 39% of farmer respondents have taken steps and of those, 31% have worked to reduce costs/debt, 23% have diversified their business and 17% have changed their farming practices in some way.

More than a third of wider supply chain businesses (37%) have made changes with the most common response (31%) being an investment in automation or other business efficiency. 23% have changed their recruitment policy or workforce requirements and 14% have invested in expansion. Other changes introduced included sourcing local/UK suppliers (14%) and changing marketing strategies (14%).

Measures needed to support business confidence

Thinking about what could be done to support business prospects as we leave the EU, the majority of both farmer respondents (44%) and wider supply chain companies (33%) said a focus on financial incentives such as productivity grants was the most likely to have a positive impact on business confidence going forward. However the need to spend more on R&D was also highlighted by 16% of farmers and 18% of companies – with a further 22% of companies wanting to see further skill development within the local workforce.

“It is encouraging to see a proportion of our farming and agri-food businesses taking steps to make themselves more resilient in the face of change,” said Adam Bedford. “But the point was made by most that continued uncertainty is a real stumbling block to effective decision making.

“This is something we are raising with increased urgency in Westminster as well as stressing the importance of getting the right framework to encourage business confidence particularly during the transition period.

“Current productivity grants delivered through the Rural Development Programme for England (RDPE), whilst beset with problems such as launch delays and a recognised underspend, are now starting to deliver benefits for farm businesses. We would like to see these schemes continued through the transition to help support micro and small businesses, farm diversifications and to boost farm productivity. The design of any new measures for the future must encourage uptake and confidence across the industry if they are to be effective.”

Importance of access to export markets

The final element of the research looked at the importance of retaining access to export markets with 45% of farmer respondents supplying produce destined for export and 43% of companies surveyed either currently or planning to export.

Of those farmers producing for export markets, 87% said export markets were either very or fairly important to their business. Exporting companies were asked if Brexit was expected to affect their export operations or plans – the result was roughly a third each answering yes (36%), no (27%) and don’t know (36%).

“Comments from our exporting companies underlined the need to finalise new trading arrangements and bring an end to uncertainty,” said Mr Bedford. “This is something we very much echo from a farming perspective with important sectors for the regional economy – most notably sheep – very reliant on a buoyant export trade.

“We regularly meet with the Secretary of State and hope the findings of this snapshot research will help drive the message home.”

Note: The 2018 NFU North East Business Confidence Survey was conducted in June by email with NFU members and wider supply chain companies that support the NFU’s Pride and Provenance campaign. 208 responses from farmers in Yorkshire were received along with 51 responses from agri-food companies in Yorkshire. All % figures reported are rounded to the nearest percentage.

Last edited on: 10:07:2018

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  • Posted by: William BradleyPosted on: 11/07/2018 21:13:24

    Comment: Apparently, most farmers voted to leave. With this in mind, surely most expect trade to continue in some form. One doesn't need to be a member of the EU to trade with the EU. Most countries are not members but trade very succesfully. As do we with many other countries.
    Uncertainty of course is worrying for everyone. But until terms are agreed we cannot predict the outcome. Much hot air continues to be spouted!

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