Farm borrowing rise is ‘a positive move’

Newly released figures showing Scottish farmers increasing their borrowing requirements by £105 million to a new record height of £1.6 billion should be seen positively according to a leading banker.

“The increased borrowing figure stated in the survey illustrates the farming sector’s continued ability to secure funding, largely based on the fact that most farmers have excellent balance sheets. This is an industry, after all, which owns about 90 per cent of its total assets,” said James O’Mahony, head of agribusiness at Clydesdale Bank.

The figures published by Scotland’s chief statistician as part of the 2011 Survey of Bank Advances to Scottish Agriculture detail the total outstanding balance of advances from banks and mortgage companies to Scottish agriculture on May 31, 2011.

Some 88 per cent of the advances from the banks were to owner occupier farmers, with tenant farmers borrowing 8 per cent of the total and agricultural contractors 2 per cent.

In addition to bank borrowing, the survey estimates that the industry has another £845m borrowed from a number of sources including mortgage companies, hire purchase agreements, leasing and family agreements.

O’Mahony added: “There’s also been a significant and encouraging growth of capital investment by farming customers. In fact, while total agricultural borrowing has risen by an average of 4 per cent annually for the last two years, Clydesdale Bank has seen double-digit growth in each of the same two years.”

The Scottish Rural Development Programme has help fund a number of projects which have also required support from banks according to O’Mahony.

The increased level of interest in renewable energy projects is another area where significant levels of investment have been made by farmers and landowners.