News

17 Jan 2019

BPS: welcome added extra or essential working capital?

As the RPA confirms that 90% of 2018 Basic Payment Scheme (BPS) payments have now been made, farmers and landowners are reminded that come 2021 the reliance on these such payments to sustain a farming business will no longer be an option.

The Agriculture Bill, issued last Autumn, gave a clear indication of the timeline for the complete removal of BPS for English farmers, and this knowledge should be used by the industry to forge ahead with plans to ensure farming businesses continue to thrive.

“Come 2021 there are predictions that BPS payments will be cut by between 5% and 25% depending on the size of the claim, with further phasing out planned until 2027 when BPS will be no longer,” explains Sally Moore, Rural Chartered Surveyor and Planning Consultant for Moule and Co.

“The arrival of 2018 BPS payments will have been a welcome relief to many. Perhaps a chance to pay off bills that have been building-up or invest in new machinery or equipment that would not be possible without the injection of BPS funding.”

However, Sally explains that this mentality is something that has got to change, and farmers need to consider implementing improvements or business developments over a period of time to avoid any last-minute brash decisions.

Areas of development

• On-farm efficiencies

Taking the time to step back and evaluate the current position of the farm business, ideally with the help of a professional adviser, a vet or an agronomist for example can be a great help in assessing where the business is, where you want to get to, and the improvements that can be made to reach these goals.

Rather than looking at the business in its entirety, it’s worth looking at each enterprise separately and evaluating its performance on a case-by-case basis.

Starting this process early will allow time for the results of these changes to be properly evaluated.

• Collaboration

Share farming agreements, contract farming and joint ventures have become increasingly popular in recent years as families and businesses look to spread risk, share resources, realise economies of scale and in some cases benefit from tax reliefs.

With the potential for some farmers to be facing uncertainty about the future of their business post-Brexit, collaboration could help with securing a level of stability. However, engaging with a professional to ensure any arrangements are recorded and executed correctly is vital to ensure the success of such ventures.

• Farm diversification

Diversifying the farm business isn’t a decision that should be taken lightly and is not right for everyone. However, with two-thirds of farmers in England already embracing farm diversification, it can be a viable and rewarding option.

Understanding your driver and motivators to diversify the farm business is an important step to ensure the business and business model you choose to move forward with can achieve these goals.

Taking the time to do your research and plan accordingly is key to the success of any farm diversification project.

You may also like:

• Five key steps before diversifying your farm business
• Top ten business tips for farmers

“There is no one-size-fits-all solution when it comes to securing the future of any farm business. However, the industry has been given the time to plan for the phasing out of BPS payments and we should use this time wisely to ensure the best possible outcomes can be drawn from the situation which is suited to each farm business,” says Sally.

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