Change is a constant in the UK rural economy

After three seasons of ever changing surprise and challenge, with agriculture having to respond and harvest results as varied as one could expect, now is a good moment to reflect on the changes about us.

These are not only climatic, but also span the market for land and inputs, affect the supply of labour and professional advisory services, and inevitably impact on levels of investment.

And hanging above all this is the uncertainty surrounding whether the country leaves the European Union in a hard Brexit or as part of a negotiated package that deals with trade and other regulatory processes in as predictable a way as business craves. What is hard to predict right now is whether there will be a sudden or gradual rate of adjustment in the wider rural economy, and restructuring in agriculture in particular.

For many farmers heading into the summer the uncustomary heat and dryness was a real surprise after such a hard winter. For the livestock farmer it has presented real challenges that are yet to be realised completely. The fact that the stock of winter feed was relied on to feed livestock in June and July does not bode well, albeit grass on the ground has in recent weeks shown remarkable resilience, to coin a much used phrase.

The arable harvest has been variable with many farmers surprising themselves as to yield, quality and price. Somewhere in that mix there was equilibrium in the end, but not for all. 2018 will be a farming year to remember for its challenges, and it is far from over.

The rural economy is a far wider part of the whole than just agriculture. Across Britain land based businesses have, in so many ways, already embraced innovation and diversification to reduce reliance on seasonal agricultural income.

This has required significant investment and differing skill sets. It relies on marketing and branding, both individual and on the part of the UK and its regions and devolved nations.

It also requires ever improving infrastructure, not least decent communications such as mobile and broadband. We all recognise that without these, modern consumer expectations will rarely be met.

And the State has a hand to play whether we like it or not. Regulation, permitting, supervision, taxation, financial incentives and grants, oversight of the banking system, trade rules, a whole myriad of ways in which the business community is hostage to the politics of the day and agents of the State and their work.

It is the anticipation of public policy which will become so critical for the private sector as the world changes. Foresight, and taking the long view whilst navigating short term change will become more critical for us all. It is the responsibility and challenge for the professional community to offer their clients thoughts about future land use, profitable ventures and structures that differ from those previously relied on.

This was very much the theme of the CLA’s Political Debate at the Royal Welsh Show on 24th July, supported by Knight Frank. I was part of a panel which discussed many of the uncertainties around Brexit and how businesses might respond.

The mood was not negative but precautionary which is the correct approach. Subsequent political tension in the negotiation between the UK Government and the European Commission suggests that there is a huge task ahead to achieve any form of orderly rearrangement of the relationship.

That the Government published only last week a whole series of guidance notes for individual sectors of the economy and the wider community in the event of a No Deal underlines the potential seriousness.

These are worth being alert to, but do not expect much comfort from the critical technical notes on the movement of goods and trading with the EU if there’s no Brexit deal and Trade Agreement Continuity. The complexities and risks are significant and will undoubtedly continue to impact on levels of much needed investment which have fallen off.

The likelihood of restructuring within UK farming is therefore rising, and some would say not before time. It needed a catalyst and could usher in a new era of rationalisation, refocusing on activities that are profitable and essential rather than desirable, and setting up a new market for services with the accompanying government incentives such as for environmental goods.

That land use will change, in part, is inevitable. Farms will grow in many places, woodland planting could become a greater priority, and protection of flood plains with enhanced management or differing agricultural techniques could become more prevalent. But agriculture itself must become more productive or the essential profitability will be eroded.

In all this unforeseen hiatus our land based businesses must keep a close eye on costs and contracts, overheads, capacity to share and joint venture, on skill sets both within families and organisations and those bought in. And of course professional advice must be relevant, strategic and cost effective.

2018 has seen some extraordinary events, natural, political and economic but as things look this month this is just the start of real change. How the UK countryside, in all its complexity, responds is the unknown.

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