Rural economy growing but farming confidence still low
28 December 2012
By Olivia Midgley
BUSINESS confidence in the non-farming rural sector is growing, but farmers are still struggling, according to experts.
The results of the latest CLA/Smiths Gore Rural Economy Index (REI) show that optimism for non-agricultural rural businesses is up with sales, profits, investment and employment expected to be higher in 2013.
CLA president Harry Cotterell said: “The outlook from the latest REI is positive for non-agricultural businesses.
“However, 55 per cent of rural businesses that use lending report borrowing rates have worsened, which of course could slow their economic recovery.
“In contrast, confidence and sales in the agricultural sector are significantly down on the start of this year due to adverse weather conditions.”
Rupert Clark of Smiths Gore said there had been a shift in the market with a fall in sales and profitability for many farming businesses because ‘dreadful’ weather during 2012 affected the harvest and caused difficulties for next year’s crops.
Mr Clark added: “If the weather in 2013 improves, we expect to see an increase in agricultural confidence as the underlying market fundamentals, of price and demand, are strong.”
Looking at rural businesses excluding agriculture in Quarter 3, 45 per cent reported higher sales over the past six months – up from 31 per cent in the previous quarter; 56 per cent reported higher business optimism for the next 12 months – up from just 20 per cent in the previous quarter, and 48 per cent predicted higher profitability over the next 12 months – up from 26 per cent in the previous quarter.
Despite the rural economy showing signs of recovery, the CLA said the impact of this year’s bad weather on agriculture was ‘plain to see’ in the figures from Quarter 3, with 47 per cent of agricultural business predicting a drop in profitability over the next 12 months – up from 28 per cent in the previous quarter.
In addition, 21 per cent reported lower sales over the past six months – up from 12 per cent in the previous quarter; and 31 per cent expected to make a lower investment in their business over the next 12 months –
up from 20 per cent in the previous quarter.