Don't build on my back yard

So we are back in recession and can confirm the ‘double-dip’ – well technically we can anyway. But should we really give this apparently depressing news anything more than a passing grimace as we get on with our job. If you look back over the last few months, GDP has been up a bit and down a bit. There is no doubt that we face some major challenges, not least where some of the property debt might come from to replace that which has to be renegotiated over the next 2-3 years, but the majority of business are getting a bit fed up with being in recession. They are keeping their heads down and just getting on with life.

The British Chamber of Commerce summed up the position succinctly in its press release which I quote below.

“The latest ONS data shows a fall in GDP of 0.2% in the first quarter of 2012, pushing the economy into technical recession. The figure is disappointing, and paints an unduly pessimistic picture of the state of the economy. Many commentators will question the accuracy of the data, particularly as it is based on only 40% of the information used for these estimates. As well as large falls in the construction sector, the estimate by the ONS that service sector output rose by only 0.1% on the quarter will be seen as too low by most analysts.

“Business surveys, including the BCC’s Quarterly Economic Survey, have shown a more positive picture, and we believe these give a more accurate indication of the underlying trends in the economy. We think it is likely that the preliminary estimate will be revised upwards when more information is available. For the time being, the main priority is to minimise any possible damage to business confidence. These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism.

“But it is clear that economic growth in the UK remains much too low. We need to see a reallocation of priorities within Plan A that will bolster business growth. That means reducing regulation, encouraging exports and improving infrastructure. While the government must persevere with plans to reduce the deficit despite these figures, it must introduce more measures to empower businesses to drive recovery.”

It would be a tragedy if we allowed the recent news to dent the vital confidence which allows business to invest in the future, because it is that investment which will drive the economy into more sustained growth.

Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk

Keep Focused on What You’re Good at and That Should Keep you and Your Business Interests Smiling

In the musical Annie, the wee orphan girl sang ‘You’re never full dressed without a smile”. I can’t recall whether this was before being taken under the wing of Daddy Warbucks but, with or without finding my own millionaire patron, I’m determined to be more positive this year.

It doesn’t come easy to those of us on the genetically dour side of the Celtic tracks. But, one month in and my disposition is still sunny. Apparently, being - or at least appearing outwardly happy - is in-vogue now too.

While the Duchess of Cambridge has a lot to be genuinely happy about, she positively beamed forth with teeth-showing and dimpled cheeks on the front cover of January’s Tatler magazine. I’m also advised that models in adverts for luxury brands Mulberry and Chanel have dropped the moody pouts in spring campaigns, whereas Bally’s models are giddy with giggling and goats in the shoe brand’s latest shoot.

While it’s not exactly mirth, my sustained positive outlook is kind-of puzzling given the relentless churn of bad economic news that just keeps on coming.

I still went to bed in a good frame of mind at the end of a day last month which saw £5 billion wiped off the share value of a company which has been the 6th largest property seller since 2007 and which is also a significant tenant and contributor of rent to some of the country’s biggest commercial property companies.

I’m talking Tesco.

It wasn’t that I was positive just because I had sealed a deal with Sainsbury’s on a unit in Cambridge at the end of last year – I’m not naïve. The ‘model’ supermarket not performing indicates it’s not rosy for the others who’ll surely follow in Tesco’s wake come the reporting season.

Yet one person’s bad news gives somebody else a lift.

On that very same January day, when the Royal Bank of Scotland announced the shedding of 3,500 jobs, it saw its stock rise by 5.5 per cent. Mixed blessings for those employees facing redundancy yet who are also UK taxpayers and thus RBS shareholders of 82 per cent’s worth of rising shares.

Boil down the analyses and commentary on the bad fortunes of Tesco and RBS and it seems that, at the core, each company had moved away from the essence of good business and that is knowing and doing what you’re good at.

Tesco CEO Philip Clarke admitted that the supermarket’s focus on expansion beyond UK shores had been a distraction. This and a seasonal price drop in-store which it had adopted as an alternative to its usual, more targeted ‘couponing’ of its loyal customers had contributed significantly to its falling fortunes.

Equally, the expert view of RBS is that its desire to divest itself of its high stakes investment banking activities will bring nothing but good. Its pre-bail out activities had diverted RBS from what it was really good at - being a very fine high street retail bank whom its Scots customers always use to refer to with affection as ‘The Royal’ as opposed to its auld enemy on the high street, the plain old ‘Bank of Scotland’.

So what’s the lesson? Keep focused on what you’re good at and that should keep you and your business interests smiling.

Will Mooney MRICS
Partner
Commercial, Cambridge

Badger/Bovine TB

In recent years I have become increasingly concerned by the effect TB is having on the welfare of our farming clients. Few people actually realise the emotional strain that is put upon families who have devoted their lives to farming, only to watch animal after animal test positive for TB in the knowledge that these stock, some of which may have been bred for generations, are now condemned to slaughter.

Farmers are often portrayed as being “hard” and “unfeeling” but in reality if you are to make a living out of rearing livestock you do need to have an empathy with your livestock after all if they are unwell they will neither grow to put on meat, become pregnant to provide lambs or calves nor produce milk. Thus the welfare of their animals is very important to farmers but they are also realists in that where there is life there is also death which is something the rest of society has, in large part, become sanitised from.

Despite this acceptance of death, the impact of the premature slaughter of livestock because of TB is often hard to handle both emotionally and financially. Farmers do receive compensation for livestock lost to TB but this is rarely sufficient to replace the livestock and goes nowhere at all to compensate for the additional costs and losses resulting from a TB breakdown such as additional feed required to sustain cattle that cannot be moved off the holding or the loss of milk production.

So, it was with interest that I recently attended a farmers meeting hosted by the Shepton Veterinary Group where Paddy Gordon, partner in the practice, spoke to a room full of dairy farmers all eager to learn how they can help reduce the impact of this devastating disease. Paddy who is a Cambridge graduate, part time lecturer at the Royal Veterinary College, winner of various national awards as well as a practicing vet is no intellectual slouch and he stated that the current policy of TB control is simply not working.

The disease has spread at an alarming rate in the last 25 years; in 1986 235 cattle tested positive in the whole of the UK while in 2010 over 28,500 cattle tested positive. Surely this is evidence enough that the current policies are not working. In Somerset, which has escaped the worst effects of the disease until the last 10 years, the number of new herd break downs increased from 34 in 2001 to 303 in 2010. Paddy Gordon estimated that in the last 10 years the number of herds under restriction has also increased from 2% to 15% in the county.

Paddy explained that farmers are sceptical about the accuracy of the TB test but he rebutted this assertion by explaining that the test is pretty accurate and the reason there are so many “false positives” is more likely to be because evidence of the disease has not become physically visible at the abattoir rather than the animal actually not being infected. Of more concern is that the test misses some infected animals at the early and late stages of the disease.

In fact Paddy thinks this is a significant issue which is why herds do need to be tested frequently to reduce the chance of cow to cow transmission. However he also went on to explain that however frequently the tests are carried out, if there is an external source of infection which is not being tackled the disease will never be brought under control.

In this respect, badgers have been identified as the primary wildlife source of the disease and recently the government has announced that it will allow badger culling in pilot areas. Paddy went on to address the assembled audience on the practicalities of doing this in the Shepton Mallet area. The theory is that if the badger population can be reduced by 70% in a minimum area of 150 sq Km then the disease will reduce in cattle by as much as 28%. By way of example, 150 sq Km would represent a circle around Shepton Mallet extending as far as Oakhill in the north and Ditcheat in the south.

It was recognised this would be both very controversial and a massive logistical task but many farmers are desperate to reduce the impact of this disease on their lives and would be willing to pay for the cull which would be carried out by trained marksmen. In the meantime many farmers are already introducing additional biosecurity measures, trying to exclude badgers from cattle buildings and feed stores but this is not easy because a persistent badger can get through a three inch gap and obviously when cattle are out to pasture this can be even more difficult unless we have mains electric fences around all fields which would no doubt also be unpopular with walkers and the like.

So, what can be done? Well Paddy Gordon’s view, which seemed to be accepted by those present was that in the short term a badger cull, alongside continued cattle testing is the only way of tackling the disease although in the long term an effective vaccine for badgers will ultimately be the answer.

I find it sad, having been involved in research in to badgers and bovine TB back in the late 1980s that the arguments over this disease have hardly moved forward since then which is probably why the disease has continued to spread. Therefore regrettably I think the time has now come for action on badgers although at the same time I think as much resource as possible should be focussed on the development of an effective oral vaccine for badgers because that will probably be the most effective solution to a problem that everyone would like to see behind us.

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

The Winter Roosts of Starlings

The winter roosts of starlings on the Somerset Levels have in recent years become a national phenomenon, even featuring on television advertisements. But, as so often happens, this spectacle has become a double edged sword because of the nuisance the birds can cause when they congregate to feed during the day at nearby farms.

It may come as a surprise to many that despite the huge numbers of birds we see during the winter, there is concern about the Starling population in this country. Indeed it has been placed, along with 51 other species on the “red list” by the UK’s leading bird conservation organisations.

The reason for this categorisation is largely because of the decline in the UK breeding population of which I have personal experience. For instance I can remember as a child being woken up by starlings scrabbling beneath the tiles on the roof above my bedroom where they were nesting and yet I cannot remember the last time I saw a starling nesting in such a manner in this area.

So there seems no doubt that the breeding population in this country has certainly declined, but the birds we see here in the winter are largely migrants from northern continental Europe and it is this disconnect between the huge numbers we see and the declining UK population which confuses many people.

Interesting as this may be, it does not get to grips with the problem we are now witnessing in this area where huge flocks of starlings are descending daily on some farms, giving rise to concerns regarding livestock feed contamination and possibly even contamination of human food products such as milk. Indeed one local farmer has claimed he has lost a significant number of livestock, and money as a direct result of the starlings. This gave rise to David Heath, MP for Somerton and Frome asking questions on the subject in Parliament.

The problem is that the Starlings are attracted to the UK because of our relatively mild winters and the reed beds on the Somerset levels provide ideal roosting sites from where the birds disperse in to the surrounding countryside in huge numbers to feed by day. As the number of farms has reduced in recent years, those that remain have often become bigger and now they provide ideal feeding grounds for huge flocks of starlings.

Dairy farms in particular are vulnerable to “attack” because they often feed their cattle with a “total mixed ration” where silage is mixed with other feedstuffs to provide the cows with a balanced “meal” providing all the necessary nutrients in the correct proportions. However, the starlings also seem to thrive on such rations and where the feed is based on maize silage in particular the starlings accumulate in huge numbers feeding in close proximity to the cows and leaving their faeces everywhere, including in the feed.

Anyone who has been under a large flock of starlings when it flies over will realise they do produce a fair amount of droppings and these may not only contaminate feed but also drinking water which many farmers are now harvesting off their roofs.

So, it is interesting to learn that DairyCo, which is a not-for-profit organisation working on behalf of, and funded by Britain's dairy farmers, has awarded a grant to local independent dairy specialists, Kingshay to investigate ways of evaluating and reducing the impact of starlings on dairy herds.

Kingshay, based at West Bradley state that “most say that maize silage is the magnet that attracts birds but some farmers have succeeded in reducing starling invasions on their farms and we need to investigate the combination of factors behind their success.”

So we await the outcome of their report with interest and in this context Kingshay would be pleased to hear from any farmers who have successfully reduced the starling problem on their farm without adversely affecting the bird population. Kingshay can be contacted on 01458 851555.

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

The European Investment Bank (EIB)

Farmers who are looking to invest in new buildings, machinery, or equipment should be aware that there are currently funds available from the European Investment Bank (EIB) which are aimed at helping investment in small and medium sized enterprises (SMEs).

SMEs are defined as businesses which employ less than 250 staff and so this covers most farmers. The size of the loan can be anything from £25,500 up to about £11m and so this should cover most levels of borrowing.

The funds, which can be accessed via high street banks or organisations such as the Agricultural Mortgage Corporation (AMC) reduce the borrowing rate by about 0.8% for loans of between 2 and 10 years and 0.6% for loans between 11 and 25 years. These discounts are available throughout the lifetime of the loan which on a £100,000 loan over 10 years would save the borrower about £4000 which is not to be sneezed at.

However, it must be understood the funds cannot be used for all types of borrowing and care is needed to identify whether the proposed investment qualifies. For instance the purchase of land or the refinancing of existing debt, which are two common reasons for borrowing money, does not qualify.

The EIB is EU’s long-term lending institution which is owned and financed by the Member States. It was established way back in 1958 under the Treaty of Rome and is there to support the EU’s priority objectives and in this instance funds are available to support investment being made by SMEs.

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

The amount of money being made available by the EIB is limited and it is likely this fund will run out soon. Therefore any farmer who is contemplating making a capital investment which will involve borrowing money is urged to make contact with their local Carter Jonas AMC agent or the author of this blog, James Stephen who will be able to put you in touch with the appropriate member if staff.

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

Not playing the blame game

Imagine a media interview in which a politician, in under eight minutes, managed to not only answer two interviewers’ questions but appeared to be without the yolk of partisanship in clearly setting out how a country could, step-by-step, find its way out of recession through central government policy.

The politician being interviewed came from a Euro-currency country but he bore no bitterness towards his more powerful northern European neighbours, nor grudges toward his southern Euro-counterparts. He was very much not in the blame game.

How refreshing but it’s probably no surprise to anyone who has done business in the politician’s country. It was Mark Rutte, the Minister-President of the Netherlands– equivalent to the UK’s Prime Minister.

He spoke clearly and openly about his country’s growth strategy which seemed remarkably similar to what many people in this region and other UK hotspots targeted for growth have been urging as the way forward.

Rutte’s strategy for the Netherlands is to focus on the innovation, creative and technology industries, aligning the universities with business and vice versa at the earliest possible opportunity.

The Dutch Minister-President was being interviewed in Manchester - another great university city with a science focus through UMIST, its university’s institute of science and technology – where his delegation had been visiting a number of SMEs in the creative and innovation industries, as well as sharing thoughts on transport.

Not by coincidence as these things play out, the previous week, forty business leaders from the Netherlands had been on a fact-finding mission to Cambridge and had met several of our academic, business and civic luminaries including Prof Alan Barrell, Dr Hermann Hauser and the Mayor of Cambridge.

You would think that at such a time of crisis for his country’s currency, that as a political leader, Meneer Rutte would be grandstanding about the need for financial institutional reform, taking a view about the role of the European Central Bank and, as a politician, he surely wasn’t going to resist having a pop at some of his counterparts?

Not a bit of it. In fact he admitted he wasn’t a fan of huge institutional debates.

Instead he coolly and calmly outlined his roadmap for growth which he summarised as getting public finances in order, taking away hurdles for new business, making government smaller and getting the universities involved as quickly as possible in business life to get development from innovation.

The Dutch leader felt that it was important for him to get in to the thick of what was going on and he couldn’t do that from The Hague. He appeared really pleased to be in the thick of it over here and complimented us by saying the UK’s innovative and creative capability were needed - with 50 per cent of our exports going directly in to the Eurozone, he’s got a point.

According to Meneer Rutte, we have much in common with other non-Euro currency countries such as Sweden, Poland and the Baltic states who are all growth oriented as much as his own country – which, after all, is this region’s closest continental neighbour across the North Sea.

This 44-year old politician is just over a year in to a role which has no limit to its term in office and based on the interview, he sounds like a person with whom we’d all like to do business.


Will Mooney MRICS
Partner
Commercial, Cambridge

Investing in the Future of Your Farm

Last week saw the second of two seminars here in the West Country, run by Old Mill accountants based in Shepton Mallet and Carter Jonas, a national property consultancy based locally in Wells and Bath. Both seminars were sponsored by the Agricultural Mortgage Corporation (AMC) and supported locally by the Royal Bath and West of England Society who also hosted the first event at the Showground.The seminars were entitled “Investing in the Future of Your Farm” and both attracted over 100 farmers which only goes to show how eager they were to hear what the speakers had to say, or perhaps the free supper afterwards was also a bit of a draw! But whatever the motivation for attending I don’t think many left disappointed.

Kit Harding, Partner at Carter Jonas opened the meetings with a talk on the market for agricultural land which, unlike the residential property market remains extremely strong, being driven largely by scarcity and increasing farm profitability.

The scarcity factor was brought home particularly starkly by one slide that showed the area of farmland sold annually has fallen steadily since the war and at about 120,000 acres being predicted for 2011, this is little more than 10% of what was sold in the late 1940s. Thus it is no wonder prices have risen, especially in these uncertain times when anyone with cash is looking for a secure investment and farmland seems to fit that description.

Further, farmland makes an attractive investment because it can attract 100% inheritance tax relief which is one of the reasons why farmers when they retire, tend not to sell their land preferring to retain it and let it out. This contributes to the scarcity of supply which is made worse by the very obvious point that “they are not making any more of it”.

Jonathon Day, new regional manager for the AMC in the South West chaired one of the meetings and said there was cautious optimism in the farming industry. He commented, "Commodity prices are the best for a while and it has been a record summer for investment and although CAP reform is on the horizon there is some reason for confidence".

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

All in all it seems the attendees left satisfied, having both food for thought and food for the stomach.

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