Agricultural firms among the hardest hit by rusting Britain

in six agricultural firms is experiencing problems because they are unable to replace vital operating equipment. According to two new research papers showing that business investment is lower than in the two previous recessions, agriculture is among the hardest hit industries in the UK.

The research papers by Oxford Economics1 and the Open University Business School2 were commissioned by the Finance and Leasing Association to assess whether Britain’s businesses are equipped to meet demand when the economy recovers.

According to the Oxford Economics research the current recession has seen an unprecedented fall in expenditure on capital agricultural equipment. Between 2008 and 2009 business investment across the UK has dropped by 27%. Business growth has been hampered by a lack of internal finance, low profitability, uncertainty over future demand and the restricted credit markets.

The Open University survey shows that 16% of the farming industry is experiencing problems coming out of recession because they cannot upgrade equipment due to poor cash flow, difficulties accessing finance or problems sourcing equipment.

The FLA is calling on the next Government to provide incentives to help businesses invest in new and updated equipment. Almost a third of smaller firms across Britain are currently not profitable so do not qualify for existing tax breaks. Making leased equipment eligible for capital allowances would boost their prospects for recovery.

Commenting on the research, Julian Rose, Head of Asset Finance at the FLA, said:

"This recession has seen the lowest ever levels of investment. Britain’s 4.7 million small businesses should be the engine of recovery. The risk is that, without the tools to invest, instead of having the latest, high quality equipment the next Government will be faced with repairing Rusting Britain."