Big rise in agricultural small businesses being held back by market uncertainty

In just six months, there has been a relative 48% rise in the number of agricultural small businesses saying that market uncertainty is holding their business back from growing, (rising from 19% in May to 31% in October)- according to new research from Hitachi Capital Business Finance.

At a time when farmers union the NFU has warned against Brexit and the likely impact on agricultural Hitachi Capital’s Business Barometer asked more than 1,200 small business owners which external factors were holding their business back over the next three months. Overall, 78% of agricultural small firms say that they are being held back by external factors  which were outside of their control, with market uncertainty emerging as the biggest problem for over a third of respondents (31%).

Agricultural sector at risk

When compared to the national average, this sector is significantly more likely to feel business growth is held back by volatile cash flow (28% Vs. national average of 14%), bad weather (28% Vs. national average of 14%), crime and theft (9% Vs. 2%), lack of understanding from banks (11% Vs. 4%) and banks also being restrictive when lending money (12% Vs. 6%)

Other side of the coin

Red tape was a slightly bigger issue compared to market uncertainty as a barrier to growth (32% vs. 31%) – but regulation issues emerged as less of a concern compared to six months ago (32% vs. 35%). That said, small businesses in agriculture are still twice as likely to feel held back by red tape than small firms nationally (32% Vs. national average of 16%).

Barriers to growth National average Agricultural small businesses
Market uncertainty 39% 31%
Red tape 16% 32%
Volatile cash flow 14% 28%
Unpredictable / extreme weather 7% 28%
Uncertainty as to the future of the business 20% 28%
Value of sterling 13% 16%
Banks being restrictive in lending money 6% 12%
Lack of understanding from lenders 4% 11%

 

Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance commented: “The agricultural sector – and the small businesses that form it – are important not only for their role in shaping the countryside, but also as a major economic driver in rural economies. Looking back over the last six months, we wanted to uncover which issues are actually proving to be the big obstacles to growth and to see which, if any, are actually having a bigger impact now in the run up to Christmas compared to the summertime.

“As expected, the picture is very different. Market uncertainty continues to be a barrier to growth for small business leaders in the agricultural sector, along with volatile cash flow, which is often a reflection of an uncertain market. At Hitachi Capital Business Finance, we have a strong track record and long-standing relationship with the agricultural sector in helping them through the highs and lows year-on-year and we will continue to invest in the future of this sector in 2020.”

 

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About The Author

John Swire - Deputy editor of Agronomist and Arable Farmer as well as responsibility for the Agronomist and Arable Farmer and Farm Business websites. After 17 years milking cows on the family farm John started writing about agriculture in 1998 and has since written for a variety of publications and has developed a wide circle of contacts within the industry. When not working John is a season ticket holder at Stoke City and also of late has become a fitness freak, listing cycling, swimming and walking as his exercises of choice.