Posted 7 June 2018 By Andrew Perrott, Partner
In Rural and Landed Estates
Figures released by DEFRA at the beginning of May showed that Total Income from Farming (TIFF) in the UK is estimated at £5.7Bn. TIFF represents the return to the farmer after paying all expenses and charging depreciation, but without any deduction for proprietors’ wages or any notional rent on owned land. As such it is closely akin to the figures shown in the typical set of farm accounts and, since it is based on a calendar year, broadly captures the results of harvest 2017.
TIFF 2017 shows an increase of 41% over 2016 reflecting better prices for both cereals and livestock but relatively static overheads. This is perhaps unsurprising when one looks at a simple “marker” such as the wheat price which rose by about £20/tonne year on year. Beef showed a similar gain. Using the same simplistic approach, one might expect another significant rise in TIFF for 2018.
However, when one drills down into the detail and the implications, the news is not quite so good. Firstly, TIFF for an average farm partner has risen to just under £29,800. If one assumes a conservative 2500 hours per annum (and most will work longer than that) it comes out at just under £12 per hour. That figure includes notional rent on land which is owned and notional return on capital invested – if these two elements were removed, the figure would probably be under £10, which is not far above the minimum wage. One also needs to consider that the hourly figures are averages. By definition half the farming population will be achieving less than the average
Secondly, the contribution of EU subsidy to TIFF is huge. At £3.2 Bn it represents 56% of farm income or putting it another way, with no subsidy the real return to the average farmer would be less than half the minimum wage and a significant number of farmers would be working for nothing.
Finally, and perhaps most importantly, TIFF in 2017 is the highest it has been since 1997. As we enter the post Brexit root and branch reform of the industry and its subsidy regime, there is a great danger that those who are unsympathetic to the industry or who wish to earmark government spending to other areas will focus on the highlights from a single set of figures, disregarding both the lacklustre return in absolute terms and the fact that these are the least bad results in twenty years.
Over the next few months, and as the results from the “Health and Harmony” consultation are digested, a new Agriculture Bill will take shape. It is to be hoped that the statistics from TIFF will be broken down to a human level, and will be seen in their historical context and not as a level which will be automatically be achieved annually in future.
To discuss this or anything else please contact Andrew Perrott on 01793 818300 or send him an email.