Therefore understanding a business’s key drivers and its strengths and weaknesses, and then contemplating the possible effects of various scenarios will be important as trade negotiations progress and UK farm policy emerges. It is always important to undertake regular reviews of the direction in which a business is going and such analysis may then result in a change in estate strategy.
Benchmarking is an essential tool and where we have applied this to estates that we manage, it has given us a clear focus on the areas of performance which we need to pay particular attention to.
It is a pleasure to publish the English results of our 2016 Estate Benchmarking Survey. These show us that across the average estate performance has improved for the second year running following a period of relatively weak annual growth in the preceding five years.
One of the key factors driving this growth is the diversity of assets including agricultural, residential, commercial and more recently renewable energy. In looking ahead real benefits may well be realised as a result of past diversification away from agriculture, by spreading risk over more asset classes and potentially lessening the impact of a reduction in farm support, should that materialise. Simply not having all your eggs in one basket!
Bedrock of estates
The agriculture and residential sectors remain the bedrock of rural estates delivering 80% of the average estate’s gross income. However, income from trading, commercial and leisure enterprises has recorded annualised growth over the past three years of in excess of 60%, and we expect the weak pound to boost this performance in the current year.
Income, of course, is only part of the equation and costs which represent 42.5% of gross income, and their control should not be forgotten. However, it is worth noting that our latest research reveals that this figure is at the lowest level for five years – this is good news but should equally leave no room for complacency!
Despite Brexit we believe the future in our sector remains positive, providing that we understand the businesses we manage and are prepared to adapt in order to meet the challenges that lie ahead. There will always be new opportunities in the rural sector and Brexit may well bring some. However, it is more important than ever to be ready to react over the coming few years.
