The rural sector is going through a period of major transition and at times of uncertainty it can be difficult to make operational and investment plans.

But, although it may be tempting to put capital decisions on hold, it’s crucial to focus on the future. The only reason for farmers not to be reinvesting in their farms is if they are planning to retire and have an exit strategy instead.

Even farmers embarking on radical diversification need to consider how best to invest in that new direction. Here are some things to bear in mind.

Finding a balance

The aim is to avoid a lumpy investment policy and to keep a balanced cash flow. Where machinery is involved, you want to match cash flow to depreciation as closely as possible. Don’t react to a large tax bill by buying kit you haven’t planned for just to take advantage of a capital allowance – it might make sense from a tax perspective but it could create a different kind of cash flow financial challenge.

Five-year planning

It’s important to have a rolling five-year plan, identifying both current cash commitments and when you’ll need to replace farm equipment. This can be adapted as necessary but is a useful guide and helps pinpoint whether things can be done differently or more cost effectively.

Does it pay to share?

Whatever your future plans, it’s always worth examining whether you are spending efficiently. Do you need new machinery or should you be employing contractors to do the work instead? Perhaps you should be sharing the cost – and risk – with a neighbouring farm, particularly if you are trying out new techniques. It may be that you don’t actually need to own something, you may only need to have access to it.

It’s about people too

Remember investment also plays a part in attracting and retaining good people to work for you. It’s not just about wages, it’s about providing the right tech and conditions to create a good working environment.

Further information

Contact Andrew Wraith

See Aspects of Land Autumn/Winter 2021 for more rural news and points of view