Looking back on 2020 – where does one start?
History will no doubt record 2020 as the year of the modern plague. The year will be remembered for lockdowns, tiers, furloughing, bounce-back loans, the destruction of many high street businesses and for some, acute financial hardship. As we go into 2021 there are some glimmers of hope on the horizon in terms of vaccines, trade deals (particularly in Europe) and a possible economic surge fuelled by deferred spending, but all overshadowed by new variant Covid and an enormous debt burden.
As we are aware, the rural economy, and agriculture in particular will, in many areas, have suffered less than the high street and the city centre. Certainly there has been some pain and dislocation, particularly in the horticulture and food processing sectors, and the rural hospitality industry has not escaped general shutdowns. There has also been reflected disruption from supply chain breakdowns which have stopped goods leaving (or entering) the farm. However, for many the impact on day to day activity has been fairly muted. For many farmers, social isolation has long been a problem but is simply part of the lifestyle, so lockdowns have had little impact on the daily activities, beyond the cancellation of County shows and most of the shooting season. Commodity prices have held up well, and at the end of December beef, lamb and cereals were all selling for between 10% and 30% more than they had a year earlier, with red diesel being some 17% cheaper. So in many respects, things are looking up.
For the rural sector, 2020 is still likely to go down in history as a memorable year and a turning point, but for largely non-Covid related reasons. Most recently we have seen the end of the protracted and painful Brexit saga, with the last minute agreement of a new trading relationship with Europe. Our new trading arrangements will by no means be frictionless, but we do now know that they will be tariff free in both directions, which will come as a great relief, particularly for the livestock sector. It is to be hoped that we can now move on and put behind us the divisive “leave -v- remain” debates which have split families, fractured long standing friendships and damaged society.
Secondly, we are on the brink of what Michael Gove has described as “the fourth agricultural revolution”. Developments in plant breeding, artificial intelligence, satellite controlled machinery and robotics are proceeding at a staggering pace and they may indeed deliver the sort of productivity changes which on a par with those sparked in the past by enclosures, refrigeration, artificial fertilisers and the internal combustion engine.
Thirdly, Covid may have created, or accelerated, a number of structural changes in our society. As an Institute we have seen that conferences and training events can now be run wholly online, a notion which most would have described as fanciful a mere twelve months ago. This not only cuts travelling time and cost, but also makes these events less disruptive and opens them up to members who would not have the time or inclination to travel to a central location. In the wider context, it has also been remarked that the entire middle-aged population of the UK has been through an intensive updating of their IT skills over the last year, driven not by office directives, but by the need to see the children/grandchildren over Christmas. More seriously, the consequences of this for those living in the countryside will be profound. Working from home is now a real possibility for many and this will have implications for communications, rural property ownership, businesses, support services and infrastructure. On the whole, these should have a positive impact on the rural economy.
Finally, of course, the Agriculture Act has now passed into law. It encompasses the thought processes first published in the “Health and Harmony” consolation almost three years ago and confirms how farms will earn their support in future. A subsidy regime which has been with us, in one form or another, for some 80 years will be replaced by an entirely new way of thinking with support being given for environmental activities rather than food production or land ownership. It sidesteps the rather tricky moral question of whether we are simply exporting intensive food production to other, largely poorer, parts of the world but foreshadows an environment in the UK where farming activity is balanced with soil protection, carbon capture, cleaner water and air and healthier and happier livestock. This way of thinking is now enshrined in law and will be enforced by the removal of subsidies over the next seven years. Many clients will already have been through the thought process of how to change their businesses to adapt to the new regime. Those who have not yet done so will need to address the issue as a matter of some urgency. In an industry which normally defines the “short term view” as that which relates to a single generation, seven years is not very long at all.
So, we can probably all agree that will be very glad to have seen the end of 2020. 2021 and succeeding years will all see their problems, but for our farming clients there will be great opportunities to grasp, and as professional advisers, our help and guidance should be more important than ever.*The views expressed are the author's and not ICAEW's.