Economic Report on Scottish Agriculture, 2016

3.12 Balance sheets (Tables B11, A13, A14)

Chart 3.17 shows the average change between 2013-14 and 2014-15 (in actual prices) of assets, liabilities and net worth of Scottish farm businesses by tenure type and the overall average for all tenures. Overall, asset values increased by around one per cent (£17,000) while liabilities increased by around two per cent (£2,000), resulting in an overall increase of one per cent (£14,000) in net worth.

Chart 3.17: Change in assets, liabilities and net worth by tenure, 2014-15

Chart 3.18 summarises the closing valuations of Scottish farm businesses in 2014‑15 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 2014-15 was £1.3 million.

Chart 3.18: Assets, liabilities and net worth by tenure, 2014-15

Chart 3.19 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 3.19: Liabilities as a percentage of assets, 2014-15

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.

Specialist sheep ( LFA), had the lowest debt ratio, at six per cent. Dairy farms had the highest ratio at 14 per cent, while those of other farm types lay between eight 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 2005 to 2015, the net worth of Scottish agriculture has more than doubled, from £15.2 billion to £34.1 billion. This is primarily because of a large rise in the value of land and buildings over that period, which has risen from £14.5 billion in 2005 to £33.1 billion in 2015, 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 64 per cent between 2005 and 2015 to £3.3 billion, representing nine per cent of total asset value.

The amount farmers invested in buildings, plant, machinery and vehicles increased by £15 million (eight per cent) from 2014 to 2015.