Covid 19 – Rural property and business update

Commodity prices

There was a general weakening of agricultural commodity prices this week off the back of falling global demand. Old season sheep values held up, but prices are down for the first crop of new season lambs. 

As mentioned previously, with the food-service sector shut down, demand for prime beef cuts has fallen. In response, Britain’s red meat levy boards have launched a £1.2m promotional campaign to encourage the public to upgrade their dining-from-home menus.

But a drop in demand does not automatically mean a commensurate fall in prices. A forecast slide in EU oilseed production to a 14-year low in 2020, for example, will help offset the predicted 500,000-tonne drop in global oil (from oilseeds) consumption this year.

Milk produces haven’t been so lucky. According to the Royal Association of British Dairy Farmers over a million litres of milk has been poured down the drain due to Covid-19.

Source: Farmers Weekly

Government support

The government has come under fire for not helping farm businesses, such as the milk producers mentioned above, during the Covid-19 crisis. But it has announced that it has extended the deadline for claiming farm support payments by a month to 15 June. The move has been welcomed, but DEFRA has been warned this doesn’t give them a month’s grace when it comes to handing out the payments.

Rural businesses affected by Covid-19 who are struggling with the cumbersome Coronavirus Business Interruption Loan Scheme, may find it easier to qualify for the new Bounce Back Loan Scheme for small and medium-sized businesses. It offers government-backed loans of up to £50,000, interest-free for the first 12 months. 

Shooting and long-term estate planning

The full results of our 2020 Shooting Season Survey have now been published and are available to download. Although the majority of shoots plan to continue - if movement restrictions allow - in one form or another this year, behind the headlines there could be longer term implications regarding woodland use and shoots. I discuss these in more detail here. 

Interestingly, my rural asset management colleagues report that their clients are taking an increasingly longer-term view – a 30-year horizon is not uncommon - when it comes to mapping out the future of their estates. 

One of the more interesting lockdown webinars I have watched made the point that well run businesses should be using this crisis to allocate time to thinking about “long-run, non-reactive” projects. This will put them in the best position to benefit from the new trends and opportunities that will eventually emerge.

Implementing business change lock-stock-and-barrel during Covid-19

Of course, while the long-term planning mentioned above is important, sometimes you just have to deal with the problem in hand. For one high-profile Knight Frank client we helped his brewery business do just that. You can read the story here. 

Rural Sentiment Survey – your chance to win fine English wine and beer

We are now collecting responses for our 2020 Rural Sentiment Survey and inevitably there is a bit of a Covid-19 theme. We’d be interested to hear how the virus has affected your business and what the other issues are that you are having to deal with at the moment. 

In a previous instalment of this update I mentioned that there were growing calls for the Brexit transitioned period to be extended. Well, a clear majority of you disagree, according to the survey responses we’ve received so far.

To receive the full results when they are ready, and for the chance to win two bottles of fine Oxney Estate English sparkling wine or a case of beer from the Gritchie Brewery (mentioned in the previous article), please click on the link below. The survey should take under five minutes to complete.

Take the survey

Rural property market update

Unsurprisingly, the farmland market remains outwardly stagnant. The total volume of farms and land advertised in Farmers Weekly has dropped by 61% so far this year. But behind the scenes, vendors are anxious to get their properties on the market as soon as movement restrictions allow. 

And buyers are still keen, according to my colleagues in our farm agency team. One told me that after ringing all of the 80 or so active buyers on his books, only one was no longer interested and that wasn’t due to Covid-19. 

If restrictions are eased in time, we could be in for a busy summer with the farm selling season overlapping with harvest, when things usually cool down a bit.

Knight Frank has also just launched the latest instalment of its Prime Countryhouse Index. According to the index, prices had just started to edge up in the first quarter of 2020 before the Covid-19 brought things to a standstill.

Don’t miss your rollover deadline – and time to buy a space station

Talking of the farmland market, one of the strong drivers recently has been the number of people with proceeds from the sale or compulsory purchase of agricultural property (HS2 has created quite a few) to “rollover”. 

Capital Gains Tax is deferred on a sale if the money is rolled over into another qualifying asset, which for farmers usually means more land (although bizarrely space stations also count, according to HMRC), within 36 months of the disposal of the old assets.

A number of clients wishing to take advantage of Business Asset Rollover Relief, to give it its formal name, have been in touch to ask if it possible to ask for an extension to the three-year deadline due to Covid-19.

The taxmen says yes in the following circumstances:

• you can demonstrate that you had a firm intention to acquire new assets within the time limit
• you were prevented from meeting the time limit by some fact or circumstance beyond your control
• after being prevented from meeting the time limit you acted as soon as you reasonably could

If you’d like more information on any of the matters mentioned above (although I don’t know where you can buy a space station) please drop me a line andrew.shirley@knightfrank.com