Slow-down in bank lending to Scottish agriculture over past year

The slow-down in the amount of lending may be a sign of uncertainty in the future prospects of agriculture, the Scottish government suggests
The slow-down in the amount of lending may be a sign of uncertainty in the future prospects of agriculture, the Scottish government suggests

There was a slow-down in the total lending from banks to Scottish agriculture over the past year, suggesting a sign of hesitation to invest among farmers.

Outstanding debts to Scottish farms rose by one per cent (£22 million) in the year to 31 May 2018, new figures from the Scottish government show.

Total outstanding lending to the agricultural sector amounted to £2.34 billion. Accounting for inflation, this was a decrease of 0.6 per cent since May 2017.

Statistics from a survey of the main banks and other lending institutions were released by the Chief Statistician.

Lending can be a sign of confidence in the industry and the slow-down this year might suggest a sign of hesitation in making investment decisions.

This could be caused by overall weak growth in the economy or concerns that interest rates may rise in the future.

Long term debts

In addition to bank lending, farms have an estimated £1.2 billion of debt related to hire purchase, leasing and other sources.

An estimated 51 per cent of total lending are long term debts, a percentage that has been slowly increasing over time.

This growth in debt is likely due to restructuring of informal debts to more sustainable repayment loans.

Total bank held debt is roughly the equivalent of ten per cent of assets, a relatively low debt ratio, due to high value assets.

The data in this publication reflects the overall UK picture. Figures from the Bank of England showed that, by May 2018, the UK “Agricultural, hunting and forestry” sector had an outstanding debt of £18.75 billion, rising by one per cent over the past year.

However, as in Scotland, this increase was smaller than in previous years.