Economic Report on Scottish Agriculture 2015

3.11 Balance sheets (Tables B11, A13, A14)

Chart 3.16 shows the average change between 2012-13 and 2013-14 (in actual prices) of assets, liabilities and net worth of Scottish farm businesses by tenure type and the overall average for all tenures. Overall, assets increased by around two per cent (by £33,000), while liabilities increased by around five per cent (£6,000), resulting in an overall increase of two per cent (£27,000) in net worth.

Chart 3.16: Change in assets, liabilities and net worth by tenure, 2013-14

Chart 3.17 summarises the closing valuations of Scottish farm businesses in 2013‑14 by tenure type. In general, owner occupied farms had the highest net worth due to the greater value of assets. Tenanted farms had the lowest overall net worth, due to a low value of assets and a high value of liabilities relative to assets. The overall average net worth of Scottish farm businesses (all tenure types) in 2013-14 was £1.3 million.

Chart 3.17: Assets, liabilities and net worth by tenure, 2013-14

Chart 3.18 shows the debt ratio (liabilities: assets) expressed as percentages for each farm type and tenure. The debt ratio provides an insight into how indebted the sector is and its ability to service those debts. Overall, Scottish farm businesses have, on average, relatively low debt ratios (liabilities nine per cent of assets), reflecting the fact that their assets heavily outweigh their liabilities.

Chart 3.18: Liabilities as a percentage of assets, 2013-14

Tenanted farm businesses, where relatively little capital is owned, have higher debt ratios, though on average assets still outweigh liabilities by about six to one; that is, for every pound of debt, the tenanted business has at least six pounds of assets. For owner occupied farm businesses assets are on average around 12 times greater than liabilities.

Cereal, general cropping and specialist sheep farms had the lowest debt ratio, at seven per cent. Dairy farms had the highest ratio at 14 per cent, while those of other farm types lay between ten per cent and 12 per cent; the overall average debt ratio was nine per cent.

At a national level, using TIFF data, over the period 2004 to 2014 the net worth of Scottish agriculture has increased by two and a half times from £13.7 billion to £34.4 billion. This is primarily because of a large rise in the value of land and buildings over that period, which has risen from £12.2 billion in 2004 to £32.3 billion in 2014, with most of this rise occurring since 2007. Land value information is based on land prices from the Value Office Agency which has been supplemented with data from the Royal Institution of Chartered Surveyors (RICS).

The liabilities of Scottish agriculture have risen 38 per cent between 2004 and 2014 to £2.6 billion, representing seven per cent of total asset value.

The amount farmers invested in buildings, plant, machinery and vehicles decreased by £10 million (one per cent) from 2013 to 2014.