Bank debts of Scottish farms hits record high

A survey of the main banks and other lending institutions showed outstanding loans to Scottish farms rose by £113 million in the year to May 31, 2017. Total outstanding loans to the agricultural sector amounted to £2.32 billion.

Accounting for inflation, this was an increase of three per cent since May 2016.

This was the eighth consecutive annual increase in Scottish farm bank debt. After remaining steady for a decade during the 2000s, debt levels have now risen to their highest since records began in 1972.

In addition to bank loans, farms have an estimated £1.1 billion of liabilities, related to hire purchase, family loans and other sources. About 50 per cent of total liabilities are long term loans, a percentage that has been slowly increasing over time. In 2003 about 40 per cent of debt was long term. Liabilities equate to about 8 per cent of assets.

The report said outstanding debt in the sector had “remained relatively constant over the period from 1990 to 2010” in real terms, after removing the effects of inflation.

However, there have now been eight consecutive years where liabilities have risen above the rate of inflation, with the overall level now topping a peak set in the mid-1980s.

The data reflects the overall UK picture, with figures from the Bank of England showing that, by May 2017, the UK “agricultural, hunting and forestry” sector had an outstanding debt of £18.5 billion, having seen a 57 per cent increase in debt levels since 2010.

The only two other business sectors that had seen an increase since 2010 was utilities, which increased 63 per cent, and wholesale and retail at 8 per cent.

The Scottish Conservatives said the “fiasco” over the subsidy payments had forced more farmers to take out loans.

MSP Peter Chapman said the figure “show the financial state of farming businesses in Scotland has never been worse”, adding: “The SNP’s catastrophic management of CAP payments starved the rural community of hundreds of millions of pounds.”

Lib Dem MSP Mike Rumbles added his criticism, saying: “SNP ministers have bungled their handling of the rural economy time and time again. It is no surprise that when farmers do not trust the Scottish government to deliver farm payments or loans, they are forced to increase bank borrowing.”

Rural Economy Secretary Fergus Ewing said: “It is vital that Scottish farmers can continue to access capital to invest in their businesses. These statistics show that banks are still lending to farmers, which is a sure sign of confidence in the sector.