Lloyds TSB comments on the latest Bank of England agriculture figures

The UK agricultural industry's total borrowing has dropped by £18 million in the quarter to December 2006. The national figure now stands at £9.375 billion, according to the latest Bank of England figures, released today (5 February 2007).

Commenting on the new figures Tim Porter, Agriculture Director, Lloyds TSB Business Banking, said:

"Prior to the Single Farm Payment regime it would have been usual to see a reduction in total farm borrowing of £300 - 400 million during this period due to crop sales and subsidy receipts.

"When compared to the previous year end figure of £9.218 billion, however, an upward trend in total borrowing remains. This latest figure represents an increase of just under 2% year on year.

"In addition UK farmers at the end of December had deposits of £4.063 billion, an increase of £335 million over the September 2006 figure. This compares with £3.552 billion at the same time last year, a substantial increase of just over 14%."

Mr Porter continued:

"Many of our customers are focused on developing new sources of income from the land and building assets they occupy. The new investments being made by farmers are strengthening farm asset bases. We are seeing a renewed sense of confidence creeping into the industry as a result of these on-farm investments, coupled with good market prices for land, buildings and commodities. Lloyds TSB Agriculture and AMC are financing significant investment in property conversion and development to help our customers refocus their businesses.

"Even before the receipt of SFP in England, deposits have risen substantially, reflecting in part the improved prices for grain and potatoes. The increase has undoubtedly also been underpinned by the continued sale of property assets.

"The recent increase in interest rates is adding further pressure to farm cashflows, with every prospect of a further increase soon. As a result we continue to see more enquiries from our customers about fixing interest rates for longer-term borrowing.

"We recommend that farmers speak to their advisors, including their local Agricultural Manager, to consider the effect of longer-term financial risk on their business and discuss ways of mitigating the effect this has on their business," he said.