Make right investments during downturn, farmers advised

A current lack of confidence in farming shouldn’t stop investment, the head of Lloyds Bank Agriculture has warned, saying that while it will always be necessary to cut costs to survive in difficult times, continuing to invest in the right things to grow tomorrow is just as important.

Andrew Naylor said it was clear from conversations at the LAMMA show (Peterborough, 20-21 January), that while farmers were confident about the long-term outlook, they were currently struggling with a combination of low commodity prices, uncertainty over Brexit, the impact of recent devastating weather and delayed BPS payments. He said the mood reflected the recent survey Business in Britain carried out by Lloyds Bank looking at confidence in general across small businesses.

He said: “The sample of farmers in the survey of 1,500 businesses was small – proportional to the percentage of small businesses in farming nationally – but there was a clear indication of lower confidence in agriculture than in other sectors. For example, only 36% of farmers questioned expected business activity to improve over the next twelve months against an average of 60% across all sectors – and only 18% expected profits to rise in the next six months, compared with an average of 46%. No other sector reported such low figures in these questions, and optimism about the economy in general was also lower than average amongst farmers.”

Mr Naylor accepted times were challenging, but it was well documented that a combination of cutting the right costs and making the right investment decisions was the most successful formula for weathering a downturn.

“We know from experience with our clients that this is the case, but a number of studies and business reviews reflect the same findings. One study carried out by Harvard Business School in 2010 looking at 4,700 businesses over three recessions found that companies who reduced costs selectively by focusing more on operational efficiency while investing in the future by spending on marketing, R&D, and new assets had better recovery.We’re not advocating ‘retail therapy’ to improve the mood – this is about taking a hard look at the investments that will help the business hit the ground running as markets pick up. They might not be the most exciting investments but they will allow a step change in the business.”

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