15 May 2017

Rural sector in Kent suffers fall in turnover as supermarkets ‘apply price squeeze’ on suppliers

The rural sector in Kent suffered a decline in turnover last year as supermarkets squeezed prices on suppliers – but improved profits as technology reduced labour costs. Revenues in agriculture and horticulture across the county fell 6% to £476 million last year despite a 23% boost to EU subsidies to about £44.4 million following the fall in the value of sterling. Turnover is down 18% since 2013, according to research by pressure group Rural plc Kent.

Director Mark Lumsdon-Taylor, who is deputy chief executive and principal of Hadlow Group, said: “Prices are being squeezed. The rate of return suppliers have had have been less positive over the last year than the year before. Supermarkets have been applying a price squeeze on their suppliers over the last 12 months.” He also blamed the fall in turnover on a consolidation in the rural market “principally in the arable farming industry. The dairy sector went through that a few years ago when the price more than halved,” he added. “As a result turnover has been substantially impacted.”

Despite the drop in income, the rural sector nearly doubled pre-tax profits to £55.1 million compared to 2016, although it is still less than half the £142.3 million surplus of 2013. This came as the sector reduced costs.

Rural plc Kent chairman Mike Bax said: “Costs were down due to reduced food and fertiliser prices but also because businesses have been forced to get leaner and meaner every year.”

Mr Lumsdon-Taylor added: “There has been an element of mechanisation, too, across the sector. The fruit industry had been screaming for technology. Now there are robotic pickers and packers. We didn’t have all that 10 years ago. There is improving margins through the mechanisation of the sector and the reduction in the labour workforce. There is more opportunity for the industry to improve profitability through EU grants and diversification. Regarding their core work, they will only improve profitability through consolidation.”

Rural plc Kent said the sector’s net assets of about £6 billion would place it around 60th in the FTSE 100 if it were a listed company, although this is down from £6.4 billion last year. Mr Bax said: “That reduction is certainly due to the shedding of land values in less productive areas. Values held up in the north Kent fruit belt but shied away on the heavier land of the Weald. Still, net assets of £6 billion is a very comfortable place to be.”

 Credit to: http://www.kentonline.co.uk/kent-business/county-news/price-squeeze-fall-turnover-rural-kent-125399/