BREXIT:Thoughts on its possible impacts

Kate Russell BSc(Hons) MRICS FAAVThe Central Association of Agricultural Valuers

The Brief

The potential impact of Brexit particularly touching on•what causes changes in land value and the potential impact of Brexit•how these changes might play out socially and environmentally

What causes change in land values?

Supply and demand for farmland is affected by a huge range of factors, including:•Performance of alternative investments•General economic outlook•Cost of borrowing•Farm commodity prices •Currency exchange rates•Relative value of UK farmland compared to elsewhere

Over a decade of capital growth

• Capital values for average arable land increased from c. £2,000/acre in 2002 to c. £8,000/acre in 2016

• That period of growth came after a long period of near static values

• Current market is more textured: where there are buyers, good land still sells well

Potential impact of Brexit on land values

• Brexit is a process which will unfold over time – change won’t happen overnight

• At least initially, we will see similar amounts of support made available to farmers – but for what?

• In the longer term, levels of support may fall – in the EU as well as UK – which could affect rental values

Possible upwards pressure?

Upwards pressure on land values could come from•Economic uncertainty•Relative performance of other investments•Increasing pressure from other land use – housing, infrastructure, etc

Possible downwards pressure?

• Institutional investors see the end of the bull run

• Trade deals unfavourable for UK agriculture

• Unfavourable currency exchange rates• Uncertainty over agricultural incomes

How might these changes play out socially and environmentally?

• UK land market is fairly stable, both in sales and in lettings

• The Brexit process will unfold over time• We can expect evolution, rather than

revolution

Some themes

• Do policy better• Improve competitiveness• More collaboration• Get farming businesses into the hands

of those equipped to handle this

Do policy better

• Opportunity to fit policies better to UK agriculture

• How devolved will that be?• Obligations to international treaties will

remain• EU anxious to avoid regulation dumping • Industry and stakeholder input needed

Improve competitiveness:commodity producers

• Inexorable pressure on costs• More use of technology• More production on best yielding land• Marginal land uncropped or put to other

use – ag-environment or PES schemes?• Businesses expanding where that can

lower overheads over the whole

Improve competitiveness:others

Those who can’t compete in commodity markets may have two options:•Add value to produce

- Processing, niche markets etc•Become a multi-income stream business

- Diversify- Let land out to commodity producers- Use the resources in other ways

More collaboration

• Happening already – Farmer Clusters, Nature Improvement Partnerships etc

• Landscape scale delivery is attractive in policy terms

• Increases scope for delivery of PES type schemes

• Opportunities for AONBs?

The farmers of the future

• Businesses must be viable and resilient• Lenders are generally supportive of the

sector• Opportunities are there for new entrants

and growing businesses• Succession and retirement planning

remains a real issue – esp for housing

What about woodlands?

• Markets for timber are more active• Large scale new forestry planting is

returning to parts of Scotland• Much talk of multiple benefits • Does the National Forest offer a model?

Closing thoughts

• Change will be gradual• Opportunities will be there for those

who can adapt• Although most farmers aren’t in it for

the money, they cannot maintain our landscapes without it

Cranborne Chase

The Sperrins

Thank You

www.caav.org.uk@CAAVAgValuer@KateAgValuer