Bank advances to Scottish agriculture: 2017 survey results

2. Commentary

The survey of bank advances collects statistics on outstanding debt from all of the banks and mortgage companies that lend to Scottish agriculture.

At the 31 ^st May 2017, the total outstanding loans from banks to Scottish agriculture was £2.32 billion. This was £113 million (five per cent) higher than the previous May. The figure excludes an estimated £1.1 billion of liabilities from hire purchase, leasing, family members and other sources (see section 3.1).

The change in outstanding bank debt over time is also shown in real terms. Taking into account inflation in this way gives an increase in farm borrowing in 2017 of £71 million or three per cent.

Chart 1: Trend in outstanding bank debt since 1980, both in current and real terms.

see table 1 for data

In real terms (after removing the effect of inflation), outstanding debt had remained relatively constant over the period from 1990 to 2010. So although actual debt had increased, prices had also gone up at a fairly similar rate, and hence the value of the debt had remained broadly constant. However, this is now the eighth consecutive year that outstanding debt has risen above inflation, and the figure now tops the peak of the 1980s.

Information from the Farm Business Survey suggests that just over half of liabilities are long term loans, a proportion that has been slowly increasing over time. In 2003 about 39 per cent of debt was long term, compared to 51 per cent now. Liabilities equated to about eight per cent of assets, compared to 16 per cent in 2003.

Chart 2: Proportion of outstanding debt by type, 2003 to 2016

Chart 3 shows the breakdown of loans by recipient. Most of the outstanding loans to agriculture are to owner-occupier farmers (87 per cent). Tenant farmers accounted for seven per cent, with others, such as agricultural contractors and livestock salesmen, receiving seven per cent.

Chart 3: Bank loans by recipient type, 1980 to 2017

see table 2 for data

The change in the trend of chart 2, with the relative increase of loans to occupier rather than to tenants, reflects changes in the structure of agriculture.