UK farming faces an existential crisis in 2023. The threats to Britain’s food security are unrelenting and unlikely to improve over the next 12 months. The NFU, just this week, warns “the UK is sleepwalking into a food supply crisis”.
Plimsoll’s latest assessments of farming in the UK highlight the reality behind the growing sense of foreboding that many companies across the sector are in for a difficult 2023. More than half of the top 1000 commercial farming companies in the UK have been rated as "Caution" or "Danger" in the Plimsoll Analysis. An alarming statistic made more stark when balanced against the challenges 2023 is likely to bring.
Food price inflation hit a staggering 12.4% over the past year. However, food charity Sustain found that for each loaf of bread sold in a supermarket for an average of £1.14, farmers make less than a tenth of a penny in profit. For every £2.50 block of cheese, a solitary penny in profit is generated. The imbalance in the relationship between producers and supermarkets is already apparent in the latest Plimsoll Analysis with a quarter of the top 1000 commercial farming companies posting a loss in the latest year, with 108 of those for the second year running.
It is impossible to assess the UK farming sector and not acknowledge Brexit. The NFU’s new chairperson Minette Batters, just this week, labeled leaving the EU a “face-slapping moment for farmers”.
From crippling red tape selling perishable produce into the world’s largest market right on our doorstep to a vastly shrunken workforce, the impact has been painful for most. As a result, average sales per employee across the farming sector has fallen again to £188,000 according to Plimsoll’s latest research. That’s around half of the equivalent output European farmers produce.
With the Environment Secretary this week distancing the government from any notion of help for UK farmers, and other consumers, in the face of soaring inflation, what next for the UK’s farming sector?
Plimsoll’s latest assessment of the farming industry shows strong growth as demand for produce recovers from the pandemic. Year on year, the average growth across the farming industry is around 6%. Can that continue once the pent-up demand from lockdowns fizzles out and the cost of living crisis crimps consumer spending?
The Plimsoll Analysis shows profitability has recovered slightly with average margins now around 3%. However, with feed prices alone soaring nearly 70% in the last year and energy remaining ruinously expensive, the margins on production could force many to cease production. Poultry and dairy farmers are already warning of rationing as more operations cease to be economically viable.
In contrast to the downbeat-mood music emanating from the UK farming sector, there is still positive news. 363 of the UK’s top 1000 agri-businesses assessed in the latest Plimsoll Analysis have received a Strong rating. While others struggle, they are best placed to benefit from any consolidation in the market and reduction in competition.
As a result of the polarization between those in a stable condition and those struggling to continue, the farming market seems ripe for a period of mergers and acquisitions. Plimsoll has, over the last 37 years, developed an acquisition rating that spots undervalued companies that have the characteristics to be a sound target for new owners. 1 in 5 companies analysed in the Plimsoll Analysis have been rated as “Highly Attractive”. 2023 could be a year of great consolidation.
With the UK already in recession and the clouds of economic chaos seemingly ever-present, the Plimsoll Analysis provides a welcome health check on the UK’s leading farming companies. We can show you the companies that are best prepared to sail through these choppy economic times smoothly and who might sink in 2023.
For more information about the Plimsoll Analysis just click here