With Brexit now just two years away and no deal regarding Scotland’s continued relationship with the EU - whether as part of the UK or as an independent nation - yet on the table, it looks likely that Common Agricultural Policy (CAP) subsidies will end for Scottish farmers.

Totalling just under £500m per annum in cash terms, the end of CAP will mark a significant reduction in finances for the country’s rural economy. And with all of the uncertainty surrounding Westminster’s Brexit negotiations, no one has any real clear picture of what future agricultural policy will look like, and what (if anything) will replace CAP subsidies.

Given the UK government’s historical opposition to direct subsidies, most analysts are expecting some kind of liberalisation of the agricultural markets. Looking at how this would fit in with broader trading arrangements, the outlook does not look positive for farmers. An NFU study conducted last year, which considered the end of CAP in the context of three possible international trade arrangements, found that the average farmer would lose between €17,000 and €36,000 per year.

Not only are farmers set to lose out on direct income from CAP subsidies, but they can also expect land values to fall. To top it all off, if the pound remains weak post-Brexit, there will be additional inflationary pressures on importing everything from feed to fuel.

Given this less than favourable outlook, the advice to farmers has to be, start planning your finances now. With so much uncertainty about the long term prospects for land based industries, the likelihood of market volatility and cost pressures, it is important agricultural businesses brace themselves for turbulent times.

Maximise Value from CAP

The first message is, make best use of CAP while you still have it, and not just in terms of the cash value of the subsidies. Now is the time to seek finance secured against your land assets, before their value falls.

Seeking finance now will help you to prepare your business for the road ahead. It makes sense to invest in repairs or upgrades to vehicles, machinery, buildings and facilities now while you can be sure of the terms of finance available. This will also help you to ‘Brexit-proof’ your business, to make sure everything is geared up to run as efficiently and productively as possible. The aim should be to invest now to reduce costs and maximise output, to make your business as lean as possible so you have a buffer against the uncertainties ahead.

It is not all about battening down the hatches, either. The remaining two years of CAP can be used to finance business diversification. Having alternative income streams will provide security against any volatility in your main market, particularly if you are in a sector that is particularly reliant on CAP such as upland sheep farming. Diversification can also help you to bring idle resources back into use, maximising income from your assets.

Peregrine Finance is the UK’s largest provider of asset finance to rural businesses. With more than 25 years’ expertise in the field, Peregrine specialises in providing bespoke financial services to land based industries. To read more about our award winning services, please visit www.peregrinefinance.co.uk.

*This article contains sponsored content and does not necessarily represent the views of The Scottish Farmer.