Survey of the Agricultural Tenant Farmers

5 FUTURE PLANS AND CHALLENGES

Summary

1. The majority of tenant farmers expected their businesses to be the same size five years from now, and around a quarter expect to increase their hectarage.

2. Just under three quarters have an eligible successor for their business in place, while a similar proportion said that their successor is willing to take on the tenancy.

3. While the majority of respondents are making pension provision for the future, half of respondents do not expect to retire until they are over the age of 65.

5.1 Respondents were asked a series of questions about their views on the future of their agricultural tenant farming business and what challenges they expect to face. They were also asked about how they were planning for retirement and for succession.

The future of tenant farming businesses

5.2 The majority of respondents (56%) said that they expect their business to be the same size in five years (see Figure 5.1). More tenant farmers expect their farms to expand than contract - 22% planned that their business would be larger than now (including 2% who plan on an increase of greater than 40%). Few planned for their business to get smaller (4%). Around one in ten (8%) respondents said that their farm business would no longer be their responsibility five years from now.

Figure 5.1: Planned future size of farm business
Q. In 5 years, do you plan that your farm business will be…?

Base: All respondents who gave an answer (2,985)
Source: Ipsos MORI

5.3 Respondents whose family had farmed the tenancy for more than 175 years (65%) were more likely than overall (56%) to believe that their business would be the same size in five years. Respondents aged under 40 (47%), aged 40-49 (38%), and those with two or more landlords for leases of more than one year (33%) were all more likely than overall (22%) to say that they expected the size of their business to be larger in five years from now.

5.4 As shown in Table 5.1, Respondents within the North West of Scotland were less likely to say that they plan to increase the hectarage of their business in the next five years (14% compared to 22% overall).

Table 5.1: Planned future size of farm business in five years by geography, type, and farm size.

	Planned future size of farm businesses in five years				Base
	Larger	Same size as now	Smaller	Don't know/ No longer my responsibility
	%	%	%	%
Region
North East	25	56	3	15	621
North West	14	62	3	21	717
South East	27	52	3	18	729
South West	23	52	5	19	893
Farm type
Arable	26	55	4	15	392
Livestock (LFA cattle and sheep) over 80 hectares	21	54	4	20	797
Livestock (LFA cattle and sheep) under 80 hectares	16	62	4	19	638
Mixed	28	52	2	19	354
Non-LFA cattle and sheep	31	51	5	13	305
Other	18	56	4	22	474
Farm business size[12]
Up to 80 hectares	18	59	4	19	462
81 to 400 hectares	27	54	3	16	920
401 to 2,000 hectares	24	55	4	17	608
2,001 hectares and over	20	55	4	21	823
Overall	22	56	4	19	2985

5.5 In terms of farm type, respondents with Mixed farms and with Non-LFA sheep and cattle farms were most likely to say that they plan to increase their business in the next five years (31% and 28% compared to 22% overall). Those with Livestock (LFA cattle and sheep) under 80 hectares were the least likely to be planning for expansion (16%).

5.6 There was no clear pattern of planned future size by current size of holdings.

5.7 Respondents who plan to increase the hectarage of their business were asked what they thought would be the biggest challenge in doing so. The reason most cited was the supply of land to buy or rent (60%), while a further 30% said that the cost of land to buy or rent would be the biggest challenge.

Figure 5.2: Challenges to increasing hectarage
Q. What do you think will be the biggest challenge in increasing the hectarage of your farm business?

Base: All who plan to increase the hectarage of their business (639)
Source: Ipsos MORI

5.8 Respondents who own land that they do not rent-out were asked if they would consider doing so in the future. Excluding "don't know/don't own any farmland" responses, 37% gave a response, suggesting that just over a third own farmland that they don't currently rent out. Of these responses, over two-thirds (69%) said that they would not consider renting it out in the future, while 31% said that they would consider this. This means that overall, around 12% of respondents owned farmland which they don't rent out but would consider renting out in the future.

5.9 Those who said that they would consider renting-out farmland that they own were then asked by which types of lease or arrangements they would prefer to do this. The majority (59%) favoured grass (seasonal) lets, while 25% said that they would consider contract farming, 15% by Short Limited Duration Tenancy (SLDT), and 12% said that they would consider Limited Duration Tenancy (LDT). Only 5% said that they would prefer to use a secure tenancy.

Figure 5.3: Preferred method for renting-out farmland
Q. What type of lease(s) or arrangement(s) would you prefer to use?

Base: All who would consider renting out land in the future (354)
Source: Ipsos MORI

5.10 Those who said they would not consider renting-out any land were asked to write in what might encourage them to do so. Of those that gave a response^[13], the most commonly mentioned factors were, financial reasons such as increased income or increased profitability (n=88), and health reasons or an inability to farm themselves (n=81). A sizeable number also mentioned something related to either legislation or that they were put off by the prospect of Absolute Right to Buy and would consider renting-out if the proposal were to be stopped (n=59). Other reasons mentioned by a small number of respondents included retirement (n=18), old age (n=16), tax incentives (n=14) and flexible contracts/freedom of contract (n=11).

Planning

5.11 Overall, 44% of respondents had undertaken some form of long-term business planning. A quarter (25%) had undertaken planning both on their own and with professional advice, while 14% had done so on their own only and 6% had taken professional advice only (Figure 5.4). A similar number (44%) had not undertaken any business planning.

Figure 5.4: Long-term business planning
Q. Have you undertaken any long-term business planning…?

Base: All respondents who gave an answer (2,273)
Source: Ipsos MORI

5.12 Likelihood of undertaking any long-term business planning was found to be highest among those in the under 40 age group: 40% had undertaken planning on their own and with professional advice, with a further 19% doing so on their own only. In contrast, 62% of those aged 65 or over said that they had not undertaken any long-term business planning, with only a fifth (21%) having undertaken long-term business planning on their own and with professional advice, and 11% having done so on their own only (Table 5.2).

Table 5.2: Any long-term business planning by age group^[14]

	On your own and with professional advice	Only On your own	Only With professional advice	Neither on your own nor with professional advice	All	Base
	(%)	(%)	(%)	(%)	(%)
Under 40	40	19	6	35	100	172
40-49	31	19	5	45	100	437
50-64	28	16	7	48	100	931
65 and over	21	11	6	62	100	501
All	28	16	7	50	100	2041

5.13 As shown in Table 5.3, respondents in the South East region were the most likely to have undertaken any long-term business planning. More than one-third (37%) had done so both on their own and with professional advice, while a similar proportion had not undertaken any such planning. Two-thirds (65%) of respondents in the North West region said that they had not undertaken any long-term business planning, and only one-fifth (19%) said that they had done so both on their own and with professional advice.

Table 5.3: Any long-term business planning by region^[15]

	On your own and with professional advice	Only on your own	Only with professional advice	Neither on your own nor with professional advice	Base
	(%)	(%)	(%)	(%)
South East	37	18	8	37	513
South West	29	16	6	48	636
North East	27	16	8	48	433
North West	19	13	4	65	452
Total	28	16	7	50	2034

5.14 Arable farmers were the most likely to have undertaken long-term business planning on their own and with professional advice (43%), with a further fifth (18%) having undertaken this planning on their own only. One-third (32%) of this group had not undertaken any long-term business planning. Two-thirds (66%) of small livestock farmers had not undertaken any long-term business planning, with smaller proportions reporting having undertaken such planning both on their own and with professional advice (16%) or on their own only (14%).

Table 5.4: Any long-term business planning by farm type^[16]

	On your own and with professional advice	Only on your own	Only with professional advice	Neither on your own nor with professional advice	Base
	(%)	(%)	(%)	(%)
Arable	43	18	7	32	270
Non LFA cattle and sheep	30	19	8	43	219
Mixed	31	18	6	45	246
Livestock (LFA cattle & sheep) >80ha	29	15	7	48	597
Other	26	14	6	54	296
Livestock (LFA cattle & sheep) <80ha	16	14	4	66	406
Total	28	16	7	50	2034

Succession

5.15 Seventy-one per cent of all respondents said that they had an eligible successor in place, while 22% said that they did not, and 7% that they did not know/not relevant (see Figure 5.5). The likelihood of respondents having an eligible successor in place was found to increase with:

• age of respondent (55% of those aged under 40, rising to 76% of those aged 65 or over)
• length of time the family have farmed the tenancy (59% of those under ten years, rising to 77% of those who have farmed the tenancy for 175 years or more)
• number of holdings farmed (70% of those farming one holding, 76% of those farming two or more)
• number of different landlords for leases of more than one year (64% of those with no such landlords, rising to 76% of those with two or more)
• and number of Secure 1991 tenancies rented-in (65% of those with no such tenancies, rising to 78% of those with two or more).

Figure 5.5: Eligible successors
Q. Do you currently have an eligible successor in place?

Base: All respondents who gave an answer (2,965)
Source: Ipsos MORI

5.16 Of those who have an eligible successor in place, two thirds (68%) said that their successor was willing to take on all of their tenancy or tenancies, while a further 4% said that they would take on some of them. One in five (18%) said that the issue had not been discussed, while 3% said that their successor was not willing to take on the tenancy (Figure 5.6).

Figure 5.6: Willingness of eligible successor to take on the tenancy
Q. Is your eligible successor willing to take on your tenancy/tenancies?

Base: All who have an eligible successor in place (2,105)
Source: Ipsos MORI

5.17 Respondents were asked if they have someone who cannot currently be defined as an eligible successor, but who would like to either succeed or be assigned to their tenancy. Only 20% of respondents said that they did know of someone in this category. Of those who said that they had such a person, 49% said that this was a sibling, while 31% said that it was a niece or nephew.

Figure 5.7: Identity of willing, non-eligible successors
Q. If yes, are they a…?

Base: All who have a non-eligible successor who would like to succeed or be assigned (562)
Source: Ipsos MORI

5.18 Figure 5.8 below shows the breakdown of possible non-eligible successors among those respondents who reported that they currently have an eligible successor. Fifty-nine per cent of this sub-group said that they have a sibling who would like to succeed or be assigned to the tenancy, while a quarter (26%) said so of a niece or nephew.

Figure 5.8: Identity of willing, non-eligible successors among those with a successor in mind
Q. If yes, are they a…?

Base: All with an eligible successor, who also have a non-eligible successor who would like to succeed or be assigned (410)
Source: Ipsos MORI

Retirement

5.19 Respondents were asked if they were making pension provision for the future. Fifty-nine per cent of respondents said that they were investing in a private pension, while 36% had general savings, 27% had on-farm investments such as herds or stock, 20% had investments in stocks and shares, and 19% had invested in off-farm property. Sixteen per cent said that they were not making any pension provision for the future.

Figure 5.9: Pension provision
Q. Are you making pension provision for the future?

Base: All respondents who gave an answer (2,932)
Source: Ipsos MORI

5.20 Arable farmers (69%), Mixed farmers (68%), and Livestock (LFA cattle and sheep) over 80 hectares farmers (67%) were more likely than overall (59%) to have invested in a private pension.

5.21 When asked at what age they expect to retire from working on their farm or to hand it over, half of respondents said that they expect to retire over the age of 65 (28% when aged 66-70; 22% at over 70). Twelve per cent said that they expect to retire between the ages of 61 and 65. A similar proportion (12%) said that they do not expect to retire from working on their farm, while a quarter (23%) said that they do not know when they expect to retire.

Figure 5.10: Expected retirement age
Q. At what age do you expect to retire from working on the farm or hand over the
farm?

Base: All respondents who gave an answer (2,952)
Source: Ipsos MORI

5.22 Figure 5.11 shows a comparison of the expected retirement ages of those who have an eligible successor in place and those who do not have an eligible successor in place. Interestingly, respondents who have an eligible successor are more likely to expect to retire over the age of 70 than those without an eligible successor (24% and 18% respectively); while those without an eligible successor in place are more likely to expect to retire at 65 or younger (20% compared with 13%).

Figure 5.11: Expected retirement age and succession
Q. At what age do you expect to retire from working on the farm or hand over the farm?

Base: All respondents who have an eligible successor (2,101); All respondents who do not have an eligible successor (630)
Source: Ipsos MORI

5.23 Respondents were presented with five factors (see Figure 5.12) which could have a role in preventing them from retiring or handing over their farm when they want to:

• 'I would never want to stop farming' was agreed with by 46% of respondents while one-third (34%) held the opposing view
• 'I wouldn't have anything else to do' was agreed with by 44% of respondents with 39% not seeing this as a barrier.
• Forty per cent said that "Lack of pension/personal finance" might stop them from retiring or handing over the farm, while a similar number held the opposite view.
• My house is part of the rented holding' was agreed with by 35% of respondents, though 45% disagreed with this.

• 'No market for this land' was agreed with by only 7% of respondents.

5.24 Unsurprisingly, respondents aged 65 and over were more likely than overall to say that never wanting to stop farming would be a barrier to retirement (54% compared with 46% overall). They were also more likely to say that not having anything else to do would be a barrier to retirement (53% compared with 44% overall).

Figure 5.12: Possible barriers to retirement
Q. Would any of the following factors stop you from being able to retire or from
handing over the farm when you want to?

Base: All respondents who gave an answer (2,537; 2,456; 2,404; 2,439; 2,295)
Source: Ipsos MORI

5.25 Respondents were also invited to report on other factors, not specifically asked about, that might stop them being able to retire or hand over the farm when they want to. These were generally mentioned by less than 3% of respondents overall: Health issues/health (56 respondents), no successor (28 respondents), already in the process of succession (11 respondents) land owners reluctance to renew/refusing farm to be assigned to family member (10 respondents).

5.26 A number of comments gave views on retirement. The following are a selection:

"If there was a retirement package for tenants more land might be made available, as on many average sized farms, tenants cannot afford to retire."

"I feel very strongly that a retirement scheme should be put in place that would allow tenants to retire on a pension, maybe this could be a percentage of S.F.P. entitlements that the tenant holds. This would free up land for new young entrants."

"At pension age, a farmer would receive less single farm payment, unless he takes a younger person in as a successor, partner, share farmer, tenant or apprentice, only when the farm is over a certain size/turnover. Farmers must be allowed to farm in their retirement - but with less state aid - to allow youngsters the opportunity to farm when young."

"Stop farmers claiming SFP over 65 yrs. - Encourage existing farmers to retire at 65 and lease out land/farm"