February 11, 2021
Article
As both Iain and Kate have alluded, the future of the UK agricultural policy is introducing a new enterprise margin. For those reading this who are AG clients, you will know that we already break down your accounts into enterprise
margins.
There is one enterprise that has always been a 100% gross profit margin – we have always called this “Other farm income”. This enterprise consists mainly of the Basic Payment Scheme.
The UK agricultural policy is clear that BPS is phasing out, and ELMs and other environmental schemes are coming in to replace them. It is not yet clear in what form and cost these new schemes will come. It is, however, clear
that they will not be the 100% profit margin that we are all used to. Over the next year, this will become more apparent as more information is released. However, for me, one thing is apparent. The other farm income margin over the next five to ten years will be replaced by a new environmental margin.
This new enterprise brings uncertainty for the future of some farms - however, it does bring opportunity. For those that engage and spend time tapping into the schemes, this margin can be just as or even more profitable
than before.
The real opportunity, as Kate has written, comes from climate change; for any of you with time in lockdown and on these dark winters evenings, I would implore you to watch the David Attenborough documentary called “A Life
On Our Planet”. This isn’t because David Attenborough tears apart Farmer's carbon output, but it shows a timeline of how our world has changed and the need for drastic change to happen now. We need to reverse it. As
a result, there is a real opportunity for farmers to help big corporations and the UK in trying to achieve a net-zero on carbon emissions – as well as the prospect of financially gaining from doing so.
With the limited information, we have currently, there is little we can do at this moment in time - however, it is important to spend time looking at how your business can benefit from the opportunities available. We will keep
you updated in future on this opportunity.