The push me-pull you summer

Whether you think of the ‘pushmi-pullyu’ creature as a gazelle unicorn hybrid which featured in the original Dr Dolittle book series or the two-headed llama of the 1960s’ musical film starring Rex Harrison in the leading role, you will be aware of the frustrating existence with which it had come to terms.

Having one head for eating and one for talking has obvious advantages in terms of a productive use of its time but in having two sets of legs facing in opposite directions, the creature ended up going nowhere of its own accord.

It has been a pushmi-pullyu kind of summer even after the post-Brexit political flurry of the governing party’s internal and cabinet politics settled down. As an aside, the tug-of-war of words among Her Majesty’s Opposition continues but, for the time being, appears to have little influence on the wider national and international stage.

Brexit means Brexit but there are many Brexit options it seems. Will it be a buffet Brexit where we can help ourselves or will it be the set menu? Will we be Brexiting à la carte or just having the lighter, continental option? All of us in business just want to know what’s for Brexit soon please so that we can get on and plan with a degree of certainty for the next couple of years, at least.

The work that the Bank of England has done - and can carry on doing - to encourage the economy to take off is widely acknowledged as coming to the end of the runway. Monetary policy is about as loose as Governor Carney and his advisors can dare make it and they aren’t the type of people to wing it. While our central bank’s latest round of action nourishes the banks and, to some extent, the financial markets, it can only do this for a limited amount of time.

All eyes then are on an early Autumn Statement from Chancellor Hammond who, it has been heavily hinted, will use the opportunity to ‘reset’ the previous administration’s economic priorities and fiscal targets. So we face forward with bright eyes and a bushy tail in anticipation of this.

There appears to be a dual-headed approach to doing business with China and this has happened all of a sudden, apparently. Day-to-day deals are being done and are to be encouraged between British and Chinese businesses. Luckily for us, Chinese investors still appear keen to invest in British research and development, technology, companies and property.

Yet, at the eleventh hour, the new UK administration has gone on a summer retreat for some quiet contemplation about Chinese firms financing of over a third of the investment required for the new Hinkley Point C nuclear power plant.

Quite a surprising volte face from the pre-24 June administration’s position. So surprising, that Lord (Jim) O’Neill who, as a Treasury minister tasked with building relations with China as well as UK infrastructure development, wasn’t even pre-warned of this re-assessment of the situation by the new administration. 

There is one view abroad – and at home – among some commentators that the UK’s value to China was or is because of access to trading with the EU.  What the the utility company Électricité de France (EDF)will make of the new view of Hinkley Point development remains to be seen.

Nobody trying to do business likes surprises. But surprising things happen which make for good business. Just look at the phenomenal success of Pokémon Go this summer.
Some pokémon can speak human languages but imagine, much like Dr Dolittle, if we could talk to the pokémon, learn their languages? Think of all the things we could discuss.

Will Mooney MRICS
Partner
Commercial, Cambridge

Fall in farm commodity prices

The fall in farm commodity prices has cut the profits from rural investments in the UK.

The total return in 2015 was 5.5 per cent – a decline of about 5 per cent from 2014’s return of 10.4 per cent.  This is the most subdued return since 2008 and reflects a slowing in the market after several years of very robust returns.

These figures come from the IPD UK Annual Rural Property Index which is sponsored by Carter Jonas and Savills. The Index tracks the performance of 1,873 properties with a combined capital value of more than £3 billion.

Caution around future market uncertainty was reflected in rural land capital growth, which reduced to 4.1 per cent in 2015 from 8.9 per cent in 2014. The decrease in the rate of capital growth made the most significant contribution to the decline in the total return.

As head of Carter Jonas’ rural team in the South West I believe the market is patchy but there is no doubt that the fall in commodity prices has had a very real impact on farm incomes and this in turn has impacted on confidence in the farming community.

More recently, political debate around Britain exiting the EU and the effect this may have on the agricultural industry has further dented confidence.  Now the level of uncertainty has ratcheted up a notch since the Leave campaign won the day.  However the vote is not likely to have much impact on world commodity markets and therefore farmers and investors are likely to continue being selective about investing in farmland.

All these factors have contributed to the land market cooling as farmers and investors are concerned that it will be a while yet before confidence returns to the agricultural economy. 

But farming is a long term industry and although rural incomes returns remain low at around 1.3 per cent according to the index, where land comes available for the first time in a generation, neighbouring farmers will very often still be interested in buying it. 

This is not least because in the long term land has often been seen as an excellent investment and they aren’t making any more of it. 

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Farmers, Basic Payment Scheme and fraudsters

Many farmers now receiving their Basic Payment Scheme money are being targeted by fraudsters.

Getting to know a few of the tricks the criminals use can make all the difference and I set out below a few useful tips to counter the threat.

Farmers are often targeted through phone calls or emails from individuals who claim to be from the customer’s bank, a business customer, or even someone in authority from within their business. The aim is to trick you into making payments, or for you to allow them to access your systems so they – the fraudsters – can collect your money.

Steps you can take to help protect yourself from the fraudsters include:

Validate requests: You should never receive a phone call from someone asking you to make a payment. If you do, independently source the contact details of the person they claim to be. Similarly, if you receive an email asking for payment or notifying you of a change in bank details, get in touch with a contact you know using independently sourced details and check the request was genuine. Email addresses can be impersonated and made to look like they’re from a genuine contact.

Watch out for impersonators: Sometimes a fraudster might attempt to impersonate someone within your business, or a trusted contact such as a bank. Take the time to make sure callers are who they say they are and be wary of caller displays on your phone. Fraudsters can and do use systems to display a number that may be known to you. 

Be wary of information seekers: If someone calls you asking for information that you’d expect them to already have, be on guard. For example, your bank will never phone or email asking for account details, passwords or online banking authorisation codes.

Look out for unusual transactions: If you receive a payment into your account that you aren’t expecting, check it out. If it’s not yours, make sure that the funds are cleared before returning them, and that they go back into the account they came from. Your bank should be able to help you with this.

Keep secrets: Never give out your online credentials, PINs, passwords or authorisation codes to anybody who calls, emails or texts you.

Don’t be rushed: Criminals will often express urgency and offer inducements to make you act quickly, so make sure you take the time to thoroughly check any requests to make payments or to amend payment details. Ignore any requests to move money to a new account to keep it safe, as your bank will never ask you to do this.

It is a sad state of affairs but it seems the answer is to never trust anyone who contacts you by phone or email unless you are absolutely certain you know who they are and why they need the information they are requesting.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Milk protests have been stimulated

Although some supermarkets are now guaranteeing to pay a minimum price for liquid milk, they have given no such assurance for the price paid for other dairy products made from milk such as butter, yoghurt or cheese. These products account for around half the milk produced in this country -- so providing guarantees on the price paid for liquid milk is only half the story.

This has stimulated milk protests across the country and farmers have blockaded the massive Morrisons depot near Bridgwater. Farmers for Action (FFA) decided to shut down the depot for a second time in a week because Morrisons turned down their request to bring forward talks on the price it pays dairy farmers for milk used to make cheese.

But it is not as simple as that. I am no expert on the milk supply chain but I do know there are many different brands of cheese and other dairy products supplied to supermarkets, and I don’t see how Morrisons or any other supermarket can control the price that all these cheesemakers pay for their milk.

Supermarkets could of course pay cheese makers more for their cheese on the basis that the makers then pay their farmers more for the milk. The price paid for cheese is obviously the fundamental point but even then it becomes increasingly complicated in that unless the cheese producer supplies all their cheese to just one retailer, it will be difficult to ensure the higher price filters back to the farmer in full.

The plight of cheesemakers themselves was also brought in to focus by the news that Cricketer Farm near Bridgwater has announced it will halt production in early 2016 after more than 60 years.

Around 20 farmers used to supply this cheesemaker with milk and they will now be hunting for a new milk buyer which will not be easy in an oversupplied market.

Cricketer Farm blamed their plight on the turmoil created by global milk oversupply and the damaging effect of the strong pound on exports. They said: “Market volatility has forced the UK dairy market into a period of uncertainty and consolidation, which is reshaping the industry to be dominated by international dairy powerhouses, focused on global strategies.”


So the pain pervades the entire dairy supply chain and it is not just dairy farmers themselves who are facing difficult times.

Unless some form of price guarantee can be introduced, the whole dairy supply chain from farmers, through processors will look very different in a year’s time and I hope the supermarkets and government realise the consequences of this sooner rather than later.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

The ESTAS 2016

We pride ourselves on the customer service we provide to all our clients and for this reason we have entered our lettings teams into “The ESTAS 2016”, the most prestigious award scheme in the UK property industry.

The ESTAS is a completely independent award scheme which highlights Estate & Letting agents providing high quality service based on research conducted with sellers, buyers, tenants and landlords in the UK. Voting has commenced and we would therefore appreciate it if you could spend just a few moments to complete a questionnaire on line via a link which your local branch can provide. You can find out your local branch by clicking here.

Please note your responses are anonymous and we do appreciate your honest feedback!

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Unlikely that milk prices will improve in the short term

The crisis in the dairy sector is well documented and it seems unlikely that milk prices will improve in the short term as world stocks of dairy commodities remain high and in Europe we are affected by the Russian import ban and increased levels of production.

This is likely to be further exacerbated by the scrapping of Milk Quota in April this year. Milk Quota was introduced by the then EEC on 2nd April 1984 so as to control the “milk lakes” and “butter mountains” that were costing the EEC vast sums of money to store in intervention stores. The introduction of Milk Quota meant that UK farmers had to cut production by approximately 20% as compared to what they had produced in 1983 and if their milk production exceeded their allocation of Milk Quota they had to pay a penal fine.

There was no compensation for the introduction of Milk Quota and as time went on the Milk Quota itself acquired a value because it became the limiting factor which stopped farmers from being able to expand. Over the first 20 years or so of its existence this country regularly went “over quota” and dairy farmers faced the prospect of fines and in some instances this resulted in farmers having to throw milk away.

However, since 2004 this country has not gone over quota and as a consequence the value of Milk Quota has plummeted from the heights of when it was worth as much as 80p per litre to today when it is worth a fraction of a penny per litre. Thus in financial terms, the fact the EU is going to scrap Milk Quota this spring is of little direct financial consequence for our dairy farmers but if the scrapping of quota encourages milk production across the EU where some countries have still been exceeding their quota, this may have a significant effect on production, further exacerbating the current oversupply situation.

However a call from the European Milk Board this week asking the EU to introduce a compensation programme for farmers to cut production seems to me to be out of step with reality. We are in a very different place from where we were 30 years ago. Back then virtually all milk produced by farmers was guaranteed to be bought off them by the Milk Marketing Board and if the price fell below a certain level the EU would step in and purchase the surplus, putting it in to intervention stores.

The introduction of Milk Quota was a means of trying to reduce such expenditure on market support and in the intervening years the level of market intervention by the EU has dropped dramatically. As a result farmers are now exposed to the harsh realities of world commodity markets over which they, or indeed the EU has little influence.

Thus it is not Milk Quota nor EU market support which will dictate the survival of our dairy farmers, it is fundamentally world commodity markets and how efficiently the dairy farm is run and to whom the milk is sold, although this latter point is sometimes more a matter of luck rather than judgment. However, the one thing I think government should do is ensure farmers are treated fairly within the food supply chain; if supermarkets want to reduce the price of milk to attract customers in to their stores, that is one thing but this should not be at the cost of the producer who has no influence on this “price war”.

I am well aware supermarkets will explain that the farmers who supply them are paid a price which should return the farmer a profit but equally I would be interested to know whether all the liquid milk that is sold in a supermarket is supplied by milk secured from their own dedicated supply contracts? If not then they will be subsidising the “supermarket” price war with milk secured off other farmers who will not necessarily be being paid a “profitable” price for their milk. I would be interested if any supermarkets would like to contact me to discuss this matter in more detail because I think a clear understanding of this would be of interest to the readership of this paper.  

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Reasons to be cheerful

This summer’s international news agenda has been tough reading and viewing. “Wars and rumours of wars” have always been the drivers of news, particularly so in our digital existence with web pages and broadcast hours to be filled round-the-clock.

While it’s been far from the silly season of summers past, weaved in to the news agenda have been more positive things. Many of these stories feature the word ‘happy’ and have lightened the mood of the summer and should give us food for thought.

Happiness can and is being measured by the Office for National Statistics (ONS). In the month in which daylight was at its longest in the northern hemisphere, the ONS analysed a raft of European data to conclude that Britain is the 11th happiest country on our continent. At 71.8 per cent, we are marginally happier than France where 71.6 per cent of adults rated their life satisfaction above or equivalent to seven out 10. This puts Brit adults just behind Germany at 72.3 per cent. Top marks went to Denmark at 91 per cent, leaving Bulgaria being the least satisfied of EU countries at just 38.3 per cent. I’m not sure what governments will do with this data but it’s interesting that they are bothering to find out.

Meanwhile in the People’s Republic of China, it’s been reported recently in the western media that quality of life has been promoted above GDP as an performance measure in a number of cities and administrative areas. Apparently, focusing solely on GDP as the key to local officials’ promotion has seen industrialisation and development rampage to the neglect of the environment, agricultural land and social welfare. So in, selected areas - although it is notable not yet in the showcase cities and areas - measures of success such as raising living standards and what President Xi Jinping calls ‘hidden achievements’ will be taken into account in judging local officials’ rise through the ranks.

Countries often look to sport when it comes to fostering a feel-good factor in their populace. Glossing over the FIFA World Cup, there was the success of the Home Nations in the Commonwealth Games in Glasgow and the European Athletics Championships. The England women’s team finally triumphed to win the Rugby World Cup after being in the runner’s up position in three previous appearances. Then, billed as a comeback, there was the Test Match Series win over the Indian cricket team by England’s men which restored a little of the pride which had been so comprehensively dented by the Ashes tour of Australia last winter.

Many of us will have come back from holiday to burgeoning email in-boxes and that’s even if we did break pledges to partners and sneaked a look at our smart phones and tablets while on holiday. But not-so employees of Daimler, whose board members wanted staff to properly relax.

The car company instituted a ‘Mail on Holiday’ system on its email server whereby the auto reply told the emailer that the emailee was on holiday and the message would be deleted but gave a non-holidaying employee contact as an alternative. Imagine how much happier – and more productive – that first morning back at work must have been for those workers and execs? This will surely contribute to Germany scoring higher on the ONS’s analysis of life satisfaction data next year.

Finally, it looks like the Bank of England is coming round to nudging up the base interest rate – well, two members of the Monetary Policy Committee are anyway. The prevailing view is that to nudge in incremental amounts, when the Bank faces up to the inevitable and raises the rate, will be easier on the economy than full percentage point rises at a time.

This is the economy which, by the way, the Governor of the Bank of England confirmed in August was half way to recovery and, presumably, he’ll and we’ll know when we arrive.

Will Mooney MRICS
Partner
Commercial, Cambridge