Bank Advances to Scottish Agriculture 2016

4. Notes

4.1 Background

The annual Survey of Bank Advances to Scottish Agriculture is effectively an annual snapshot of the outstanding debt of Scottish agriculture at the end of May. Please note that this is not an estimate of new lending as we do not have access to the underlying debt profile of Scottish agriculture, i.e. we do not know what are new loans, and neither do we know the repayment timescale associated with these loans.

4.2 Uses of the information

These statistics are used by government and stakeholders to monitor the outstanding debt of Scottish farmers and to inform related debate and policies.

The survey is conducted to help construct an estimate of the total interest payable on borrowing by Scottish agriculture. This allows us to adequately represent this cost as part of the annual compilation of the Scottish Agricultural Account, i.e., the Total Income From Farming ( TIFF) estimate. The annual TIFF estimate is required in order to meet the requirements of Statistical Regulations of the European Commission.

http://www2.gov.scot/stats/bulletins/01197

The statistics also help the government to form, monitor and evaluate policy, and help in assessing the economic well-being of the agricultural sector.

4.3 Methodology - data collection

The Survey of Bank Advances to Scottish Agriculture is conducted annually by the Scottish Government's Rural and Environment Science and Analytical Services Division ( RESAS).

Data for the survey is collected directly from all banks and mortgage companies who are involved with lending to Scottish agriculture. The outstanding debt for each bank is aggregated to provide a total for Scottish agriculture.

GDP deflator data from the Office for National Statistics ( ONS) is used to present the series in real terms, which effectively shows how much older debt would be "worth" in 2015 prices.

4.4 Methodology - alternative sources

There are no other appropriate sources for this data, which means that a specific survey has to be carried out to collect the information required.

Given the need to estimate the interest bill for all of Scottish agriculture and the small-scale nature of the bank advances survey it is deemed to be the most appropriate mechanism to collect the data that is needed. The survey is not particularly onerous to complete and has a low overall respondent burden.

Whilst there are other sources of similar data available, it should be noted that these other sources do not provide us with precisely what is needed to model the interest bill of Scottish agriculture;

• we collect quarterly data on lending from the British Bankers Association ( BBA) although this only provides an aggregate lending figure for 'agriculture, hunting, fishing and forestry'. This is collected to allow us to compile an accurate picture of the outstanding balance across the year, in order to apply appropriate interest rates.
• Although we do collect data on bank lending through the Farm Accounts Survey ( FAS), we cannot rely solely on the FAS as (i) it is only representative of larger farms above 0.5 standard labour requirements and (ii) is not representative of wider Scottish agriculture (for example, horticulture, pigs and poultry units are excluded from the FAS sample.
• We also obtain data from the Bank of England on lending at a UK level for 'Agriculture, Hunting and Forestry' (treated as one sector), which are published in section 3.4.

4.5 Data Quality

Data undergo several validation processes as follows; (i) checking for any obvious errors on the survey returns upon receipt, (ii) auto-checking and identifying any internal inconsistencies once loaded onto the calculations workbook, (iii) auto-checking for any sudden changes in comparison with previous annual returns, (iv) assessing trends and volumes from the other data sources listed above at 4.4.

If necessary the banks are re-contacted to ensure their data is correct.

This is effectively a census of all banks and mortgage companies lending to Scottish agriculture, and returns were received this year from ten of the twelve organisations, but covering the vast majority of loans. A few banks were also unable to give the exact breakdown requested ( e.g. between agriculture and fishery) and this split is therefore estimated using the ratios for other banks.

4.6 Revisions

The bank advances statistics tend not to be revised as a matter of routine. This is because the banks can usually supply robust data on the closing position of outstanding debt by the time the survey is conducted.

The Scottish Government's policy on revisions is available at the following link

http://www.gov.scot/Topics/Statistics/About/CPSonRevisionsCorrections

4.7 Other publications

The next release of the Total Income From Farming ( TIFF) statistics (which use the bank advances survey data) will be towards the end of January 2017.

The 2015 Total Income from Farming statistics are presented here:

www2.gov.scot/stats/bulletins/01197

The results of the 2014-15 Farm Accounts Survey are presented here:

http://www2.gov.scot/stats/bulletins/01208

The 2016 edition of the Economic Report on Scottish Agriculture, containing other financial information, can be accessed here;

www2.gov.scot/stats/bulletins/01230

Results from all Scottish Government agricultural surveys can be accessed here:

http://www.gov.scot/Topics/Statistics/Browse/Agriculture-Fisheries/Publications