While times remain tough for farming, recent challenging market conditions have actually boosted productivity, meaning the industry is now punching above its weight again relative to the rest of the UK economy.
Lloyds Bank’s head of agriculture Andrew Naylor explains that farmers have responded very well to recent low commodity prices. “We’ve seen improving efficiency over the past 12 months, and now productivity, which is one of the greatest challenges to the UK economy as a whole, is actually much better in the agriculture sector than in other industries,” he says.
Agriculture’s contribution to the UK’s national income or Gross Value Added (GVA), is now 10.3%, greater than it was in 2008, whereas GVA in general has grown by 7.5%. So in those terms, agriculture has outperformed the UK economy as a whole.
“One of the key factors has been this extended period of low interest rates, which has definitely fostered investment; much of agriculture’s borrowing in recent years has been channelled into infrastructure, expansion and automation – placing us in a strong position for the future despite depressed markets.”
Mr Naylor says the Bank of England’s figures for net lending to agriculture, forestry and fisheries increased from £292 million to £1,260 million between 2010 and 2014 – but at the same time UK farmers’ contribution to the economy grew by 45%.
“Borrowing in the farming industry may have quadrupled over the past five years, but the resulting investments have helped grow UK farming’s contribution to the economy to almost £10 billion annually.”
Mr Naylor says the improvement in productivity will stand the sector in good stead as it looks ahead to 2016. “We are expecting that falls in commodity prices will at least stabilise in the year ahead, and with anticipated growth in the overall economy of around 2.5% next year, growth in agriculture is expected to remain positive.
“The good news is farming remains of huge importance to the economy as a whole. Total farm output has grown by a quarter to £25.8 billion in the past five years and the agri-food sector employs some 3.8 million people or 13.4% of the total UK workforce. That’s a significant contribution.”
