As a leaked cabinet letter warns of the chaos a no-deal Brexit could cause, we’ve looked at how it could affect the farming economy.
Earlier this month a leaked letter from cabinet secretary Sir Mark Sedwill warned that a no-deal Brexit could cause a 10% increase in food prices and a devastating UK-only recession worse than that of 2008.
This news came just days after the EU chief negotiator Michel Barnier warned that a no-deal Brexit is becoming more likely “day after day”.
As parliament currently work to try to stave off a no-deal outcome, we’ve looked at how this result could affect the farming economy.
The affects of a no-deal Brexit on the farming economy
Agriculture employs 3.8 million people and generates £113bn for Britain’s economy according to The UK in a Changing Europe. A no-deal Brexit is likely to throw the whole industry into turmoil, not just negatively affecting the farming economy, but Britain’s wider economy too.
Just a few of the potentially devastating effects a no-deal Brexit could have on UK farming include:
- A ban on the export of animal products from the UK to the EU until the UK is granted approval.
- Uncertainty over future import/export tariffs.
- A ban on exporting organic products as the EU will no longer recognise UK organic certification bodies until approval is granted. Organic exports account for around 20% of the dairy industry’s total organic sales.
The process of applying for approval for export is not a quick one and can take months, during which time many farms would suffer significant losses that could put them out of business.
National Farmer’s Union president Minette Batters has warned that “a no-deal Brexit would be disastrous, not only for our farmers but for the public too” and that it should be “avoided at all costs”.
Machines are critical to growth in the manufacturing sector but they are often expensive and can eat into business profits without some form of financial help.
Traditionally business owners turn to the bank to provide straightforward business loans to help if there is insufficient cash in the business to purchase machines. Even if there is enough cash to buy a machine, a loan can be a more sensible way to buy equipment particularly if there is risk attached in making large investments as there often is in business. However, business loans from banks also come at a cost and interest rates can be high.
Having multiple loans can also leave a business vulnerable in a downturn and restrict any cash flow available to grow the business. Machine finance is growing in popularity because it unlocks funding when you need it.
So if your business requires a new machine that will cut down the amount of manual labour required to get jobs done such as a CNC machine, machine finance can help you acquire that machinery at a minimum upfront cost.
This means you get the benefit of improved efficiency and profitability while spreading the cost. It can also be tax efficient now that the government has increased the annual investment allowance. So it comes as no surprise that the machine finance sector has grown 9% year on year.
It’s in every entrepreneur’s nature to want to grow their business, however doing it on a shoestring can be difficult but not impossible.
One of the most important things to think about as an entrepreneur starting a new business is future direction. Are you thinking big? Are you making plans to take the business to the next level?
If you are, then this is an important first step. As soon as you have the vision for where you want to take your business then you will need funds to bring your plans to fruition. This is where a lot of entrepreneurs fail.
They can often end up stuck in a rut without exploring the funding options available and rely on the business itself to generate the funds for growth. Unfortunately as almost every business owner knows, you can’t always rely on sales to fund expansion.
So it is worth considering funding options that will help clear the obstacles to future growth. These can include:
Friends and family
Many successful business have started with help from friends and family. Just make sure you have a proper agreement set up from the outset in writing, just in case things don’t go according to plan.
Ok this may not be the best source of funding available. You will have a lot of interest to pay and banks won’t just lend to anyone, but if you can present a strong business plan, then there are plenty out there who will be willing to take the risk even if you are a small business owner.
Alternative business finance
Alternative forms of finance are flourishing. Asset based finance, crowd funding, funding from business angels and so on. You may even get better terms than from the bank with these alternatives.