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Partner at EQ Accountants, Graeme Davidson CA, emphasises the resilience of the Scottish rural sector

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By CA magazine

6 July 2022

EQ Accountants count numerous Scottish farmers among their clients. Forfar-based Partner Graeme Davidson CA explains why, despite soaring costs and chronic labour shortages, he’s confident for the sector’s future

Read July/August's CA magazine now

How much is a pint of milk? It’s a question with which interviewers love to ambush politicians – the perfect litmus test to gauge just how out of touch one is with the real world. There’s one profession, though, that definitely knows the value of a bottle of semi-skimmed: the UK’s 104,000 farmers. The global food crisis is seeing them juggling rising costs of the “three Fs” – fuel, fertilisers and animal feed. Get these calculations wrong and they could spiral into debt.

“The biggest problem farmers will always face is that they’re price-takers,” says Graeme Davidson CA, Partner at EQ Accountants, one of the leading accounting and business service providers for the Scottish rural sector. “Because of their position in the supply chain, they’ll always feel powerless [to set prices]. When prices go down, they have to take it on the chin.”

Synthetic fertiliser, used for growing crops and grass, has seen a dramatic price hike in line with the cost of the gas that is used in its manufacture. Meanwhile, feed prices have also rocketed due to the Ukraine war, as much of the grain used for feed, such as wheat, is produced in the Black Sea region. Escalating energy costs, such as the fuel required for their tractors and machinery, aren’t helping. These upheavals have led the National Farmers’ Union to describe the current predicament as the “toughest times in a generation”.

As a result, Davidson and EQ Accountants are “having conversations with clients about more than just their accounts or tax returns – we are a sounding board for our clients on a whole range of issues, financial and non-financial”.

The volatility has been amplified by a chronic labour shortage. With many overseas workers returning home during the pandemic, and Brexit visa restrictions capping the number of EU temporary workers, such as crop-pickers, to just 30,000, unharvested crops were left to rot in fields last year. Last August, job vacancies in the food and farming sector were estimated to be 500,000. A lack of abattoir workers has seen more than 35,000 healthy pigs culled since September.

“Many of our clients usually have 300–400 workers on their farms during the height of the season to harvest their crop. For the past 15 years they’ve been largely reliant on labour coming in from eastern Europe,” says Davidson. “This [battle for] labour is going to be a big problem going forward.”

Throughout the crisis – and for many years before – these rural communities have also turned to EQ Accountants for emotional support. “Farming can be a lonely business,” says Davidson, many of whose clients are family-run firms. “[As an adviser] you get into conversations you wouldn’t necessarily get involved with, such as domestic difficulties. You also end up being a player in succession discussions – whether to pass the farm on to new generations or sell up.”

Still, Davidson – who marks his 25th year at EQ Accountants in 2022 – knows one thing: never underestimate a farmer’s entrepreneurial spirit. “People working in rural communities are very good at spotting opportunities” he says. “Every week, you see somebody else spying a new opportunity, then having the gumption to pursue it.”

As a consequence, Davidson and his colleagues have become accustomed to advising on matters well beyond the price of milk. Many farmers have forged new and more profitable ventures in recent times: farm shops, accommodation such as B&Bs or glamping, or leasing their spaces as wedding venues. So a cost-benefit analysis or capex investment appraisal can be critical.

Others have also embraced renewable agri-tech such as wind, hydro, solar and biomass projects and even robot raspberry-pickers – all potentially risky investments for which expert advice is often essential.

Davidson also notes that today’s farmers are very tech savvy: “Everything is digitised – not just their financial records and banking, but also livestock and cropping records. As we see all this information in real time, our job becomes easier.”

Farmers’ mathematical skills also helps EQ Accountants, particularly when conducting one of their business appraisals. “Their mental arithmetic is often better than mine,” says Davidson. “They can work out their costs in the click of a few fingers.”

It’s just such growing modernity that gives Davidson confidence farming will withstand its current challenges. “Farmers are having to deal with bigger numbers, and cashflow difficulties may extend into 2023 and beyond, but there are a lot of people looking to take the sector forward,” he says. “Farmers will always find new opportunities and a way of working things out.”

eqaccountants.co.uk

Read July/August's CA magazine now

CA magazine: July/August 2022

By Sarah Speirs, ICAS Executive Director of Member Engagement and Communication

6 July 2022

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