Farming SMEs bouncing back from pandemic but cash reserves remain a concern
Farming SMEs are bouncing back from the pandemic nearly twice as fast as other industries, with 96% of business owners reporting that their turnover now either matches or exceeds pre-Covid levels against a cross-industry average of 54%.
New research from Paragon Bank also revealed that SME owners within the agricultural sector hold the highest levels of optimism, with 94% of business owners believing they will be stronger than before the pandemic, against an overall average of 65%.
Despite the rapid pace of recovery, SMEs within the agricultural sector had lower cash reserves than the cross-industry average, holding around £658,000 against an average of £718,000. They were also one of the sectors most likely to report being dissatisfied with their levels of cash reserves.
Farming SMEs were also the industry most likely to use government support schemes, with only 99% of the industry using at least one scheme (against an average of 82%) – however 85% felt that government support could have stretched further.
More than four in ten businesses (41%) surveyed would have liked to see further educational and non-financial support from the government around issues such as managing the aftermath of Brexit. This is against a cross-industry average of just 17%.
Commenting on the findings, John Phillipou, head of SME Lending at Paragon Bank, said: “The agricultural sector has not been immune to challenges throughout the pandemic, and this is reflected in the lower than average levels of cash reserves held by SMEs. Challenges will have included labour shortage, transport and logistics disruptions, equipment shortages, manufacturing delays and shifts in consumer demand, to name a few. The pandemic also compounded many challenges brought on by Brexit.
“However, a key driver of the industry’s positive outlook will likely be that while a high number of SMEs struggled with lockdowns and saw activity grind to a halt, agricultural businesses often saw a significant boost in food supply demand. This was further driven by an increasing consumer focus on the ‘farm to fork’ journey and on food provenance.
“It’s also interesting to see that many SMEs within the sector would have liked to see more government support – with 85% of businesses calling for more support against an average of 67%. It’s clear the sector would have benefited from clearer guidance, advice and non-financial support around how to navigate recent changes, particularly in the aftermath of Brexit.”
Innovation a key priority for agriculture
Innovation was named as a leading priority for agricultural SMEs post-pandemic both on an industry level (important to 94% of industry business owners vs 79% average) and on a business level (93% vs 77%).
This commitment was reflected in the fact that 90% of agricultural business owners planned on increasing their innovation budget, against an average of 61% across the overall UK SME landscape. The average budget increased planned by agricultural SMEs was 29%, from a pre-pandemic budget of £77,686 to £100,324.
John Phillipou added: “The agricultural sector is clearly committed to innovation, which is reflective of the industry going through a particularly transformative period. There are plenty of opportunities within the industry, including the emergence of green technology, digital innovation and diversification.”
