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Controlling the controllables - building a sustainable farming sector

One thing’s for sure, we’re operating in precarious times.

As such, and particularly given the current political and economic uncertainty, it has arguably never been more important for the rural sector to invest in a sustainable future.

From our perspective, the message is straightforward: be proactive and control what can be controlled.

I was interested to read the results of Thomson Cooper’s survey of local farmers, which showed the main concerns seem to be evenly split between Brexit and current day-to-day challenges - such as weather, commodity prices, and input costs - both polling at around 40%.

What’s interesting is that, in third place, 12% were concerned about succession issues.

Unlike these other external factors, succession is something that can be controlled.

It can also be extended to encompass long term business planning.

In essence, the simple act of writing down a plan can be the key to long-term success.

Comparisons and challenges

A popular comparison is to look at New Zealand and Australia where there are no subsidies, and where farm business structures are looked at very seriously.

In fact, external board members are commonly brought into family farms.

While I’m not going so far as to suggest that, building a team of professionals to guide business owners through the complexities of succession planning, while also challenging existing practice, will be ever-more important back here in Scotland.

While an Agriculture and Horticulture Development Board (AHDB) paper highlights a number of important differences between the UK agriculture sector in 2017, and New Zealand in the 1980s, it does conclude that success for UK agriculture post-Brexit will come from the same school of thought as it did in New Zealand: efficient, market-led production.

With a focus on efficiency and streamlining, there are likely to be opportunities for businesses to carve out niches and to diversify further.

A common theme underpinning such success is attracting the next generation - its enthusiasm and fresh perspective - into the sector.

A large part of doing that falls to effective succession planning.

With a new series of the oversubscribed Scottish Association of Young Farmers Clubs (SAYFC) Cultivating Futures business course about to start again this autumn, there is certainly a healthy appetite for accumulating business acumen from our young farmers.

Death or incapacity should not be the trigger for emergency business planning, especially if inadequate provision can lead to unintended and often devastating consequences.

The legal complexities of the Scottish system mean it is extremely important that the background of the business set-up is thoroughly investigated at the time of planning.

This means the party’s intention is accurately documented at the time of drafting.

Then the desired outcome can be achieved without being laid open to unintentional claims at a later date, which can prove disastrous to the family business.

Investment in succession

Investing in specialist advice has never been as important.

While the cost of succession planning can be a concern, many farmers would consider not investing in improving stock or machinery as foolish, but perhaps don’t spend the same time or effort selecting suitable professional advisors, and investing in their advice to protect the business.

As a relatively small investment compared with other farm costs, doing so can provide protection from significant, even multi-million pound, claims.

Claims that can threaten the very existence of the farm business when a family member dies.

In conclusion, especially in uncertain times, we need to control what can be controlled.

Much like buying quality equipment and livestock, robust succession planning - and well structured farm businesses - will likely prove essential to the long-term success of an agricultural sector: helping build growth in the rural economy, and playing a role in securing a sustainable future.

An earlier version of this article appeared in The Courier on 11 September, 2017.

Linda Tinson

Stirling-based Linda Tinson is the director of rural business at Ledingham Chalmers. Linda has vast experience in all aspects of business in the rural and agricultural sector. She has a strong background in property, including purchasing and sales, advising on security transactions, property development and tenancy issues. She also has experience in family business and personal succession planning.

Posted, 18 September 2017 by Linda Tinson
Categories: Family law | Private client | Rural