March 2014 (RPC PB 2014/02)
Young Entrants to Farming: Explaining the Issues
Catherine Milne and Allan Butler
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Key points
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In Britain, as in much of Europe, there are concerns about the number of new entrants to farming. This
briefing explains the reasons for these concerns, with particular reference to the economic importance of
having ‘sufficient’ young entrants, and discusses ways in which the barriers to entry faced by young
entrants may be overcome. It suggests the factors to consider when designing future policies in this area.
The next generation of farmers (young entrants) is essential to the long term vibrancy and sustainability of
the farming sector in Britain. However, although many consider that the number of young entrants to
farming is below desirable levels, neither the optimum nor actual numbers are known.
Increasing the number of young people entering farming could have wider benefits to society, for example
through increasing the resilience of rural communities.
There are however potential negative economic effects of increasing the number of young entrants, both
for individuals themselves, and for the industry as a whole. For example, the production efficiency of farm
businesses can be lower if managed by inexperienced as compared to experienced farmers. In addition,
for individuals, the costs of transferring farming businesses can be significant.
Young people seeking to enter farming must overcome considerable entry barriers, which are much
greater than in the past. For instance, today a much higher level of capital is required (for example, to
purchase specialist machinery and equipment), and for many core farming activities, such as spraying
crops, there are prerequisite vocational qualifications. Moreover, there is
a lack of tenancy opportunities and the cost of land is high.
The type and relative importance of entry barriers can vary with the
individual entrant’s circumstances and entry route, making it difficult to
provide universally supportive policy interventions. For example, some
policy measures have sought to address capital requirement barriers
through provision of a capital premium, while others have focused on
training to improve skills. In Scotland, measures in place through the
Rural Priorities mechanism (part of the 2007-2013 Scotland Rural
Development Programme, SRDP), have included offering interest rate relief on a commercial business
development loan and an establishment grant. The Scottish Government also funds a support programme
for new entrants to farming, which includes a ‘New Entrants Gathering’ to be held later this month.
Given the economic and social value of having a healthy supply of young entrants to farming, policy
makers may wish to consider the following when designing future schemes to support young entrants:
o Supporting the retirement of outgoing farmers may be as important as supporting young entrants
given that a lack of retirement capacity (e.g. insufficient pension incomes and housing) is limiting the
availability of land and other key resources for young farmers.
o Negative, unintended, side-effects of unrelated policy measures on entry to farming may need to be
addressed. For example, re-aligning taxation of lifetime gifts that receive tax relief after death.
o Policy interventions that directly assist young entrants to overcome entry barriers need to be flexible
and tailored to the specific circumstances of individual entrants, and they need to address barriers to
engagement in supportive measures. For example, the uptake of training courses might be
improved if support was also provided to cover the cost of employing relief labour to care for
livestock while young entrants are off-farm attending training courses.
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This briefing was part funded by the Scottish Government’s Strategic Research 2011-2016 Underpinning Capacity
programme and Rural and Environment Science and Analytical Services Division (RESAS) under Theme 4, Economic
Adaptation http://www.scotland.gov.uk/Topics/Research/About/EBAR/StrategicResearch/future-researchstrategy/nonprogramme
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Dr Catherine Milne, Agricultural Economist, Future Farming Systems, SRUC; E: [email protected]. Dr Allan Butler,
Economist, Future Farming Systems, SRUC; E: [email protected].
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Introduction
Every industry needs to have young entrants that will refresh, learn, mature and, in time, lead it.
Traditionally in the UK, most young farmers enter the industry through intergenerational succession, which
is typically also interfamilial succession i.e. transfer from (grand)father to son/daughter. At present, many
commentators consider the number of young people entering farming to be too low – though the actual
number is not known. Amid concerns that there is a growing problem across Europe, discussion about
young entrant numbers is currently linked to the development of 2014-2020 Rural Development
Programmes. In Scotland, a ‘New Entrants Panel’ 3 was established in 2012 to advise the Scottish
Government on how more new entrant farmers can be supported to access opportunities to take up farming.
Starting in 2013, the Panel has been providing funding for new entrants who are currently excluded from
receiving single farm payments.
This briefing looks at the evidence for a shortage of young entrants and the potential implications of this,
before considering the barriers that need to be addressed and how policy intervention might adjust the
farming demography.
The evidence for a shortage of young entrants
The evidence for a shortage of young entrants is often cited as the high
average age of farmers. The current average age is higher than would be
expected of a demographically balanced industry 4 and the increasing
average age 5 could be seen as indicative of insufficient young entrants.
However, its use as an indicator of a lack of young entrants may be
misleading for two reasons. First, the average age is calculated from the age
of the business principal as recorded in census data or structural surveys. It
does not account for other, younger, people who may be present and closely
involved in the farm’s management and operation. Second, appointed
successors may exist and be involved in farm decisions5 but be invisible in
the recorded data.
Succession rates (i.e. the proportion of farmers with an identified successor)
can also be used as an indicator, though like average age data, it must be
interpreted with care since:
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it is influenced by the household stage – e.g. for direct intergeneration transfers a farmer needs to
have children of an age that succession planning can be undertaken before an identified successor
can exist.
while traditionally in the UK succession has been the primary entry route, other pathways to farming
are possible.
In one UK study, the succession rate recorded was 84%, suggesting that there is not a lack of successors 6.
The interpretation of the evidence is therefore open to debate.
The argument that there is not a shortage of young entrants however does not pivot on whether or not there
are fewer young entrants now than in the past. It comes from the contention that fewer are needed than in
the past, since technological developments 7 are lowering farm labour needs, and the number of farm
businesses is falling because average farm sizes need to increase in order to maintain financial viability.
The expectation is that as senior farmers retire, structural adjustment (i.e. changes in the number of farmers
and farms) will naturally occur with land transfers. The actual and optimum number of young entrants is
thus unknown and subject to interdependent dynamic relationships.
3
For more information, see: http://www.scotland.gov.uk/Topics/farmingrural/Agriculture/NewEntrantsPanel.
In 2011, 54% of Scottish agricultural holding occupiers were over 55 years of age (Scottish Government (2012) Economic
report on Scottish agriculture. Available online: http://www.scotland.gov.uk/Resource/0039/00394935.pdf.). The average age
of farmers in the UK from 2007-2010 was 59 (Defra, DARD, WAG and The Scottish Government RESAS (2013) Agriculture in
the UK 2012. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/208436/auk-2012-25jun13.pdf).
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For more information, see: http://www.scotland.gov.uk/Publications/2010/05/05134234/84.
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Lobley, M., Baker, J.R. and Whitehead, I. (2010) Farm Succession and Retirement: Some International Comparisons,
Journal of Agriculture, Food Systems and Community Development 1(1) pp. 49-64.
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In Scotland the total agricultural workforce fell by 10% in the 30 years (Scottish Government (2010) Abstract of Scottish
Agricultural Statistics 1982-2012. Available online: http://www.scotland.gov.uk/Resource/0040/00402610.pdf).
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The perceived implications of a shortage of young entrants
Quantification debates should not, however, detract from the
underlying concerns. Farmers need to be highly skilled and their
businesses are increasingly complex. A breakdown of the succession
system on which the industry has long relied is recognised as having
important consequences not only for the agricultural sector but for
society more widely8. Particular concerns relate to interruptions to the
intergenerational/interfamilial transfer of the tacit knowledge and skills
development that underpin effective management of resources in
uncertain conditions. First, this could lead to a decline in the efficiency
and competitiveness of farm businesses and, second, levels of
environmental and animal welfare care and lower provision of
ecosystems services could result from less expert management (for
example, it could delay diagnosis of animal health conditions). Overall,
the outcome could be a less viable and vibrant industry, combined with
negative environmental implications9,10.
In addition to these concerns, within parts of the debate there is an
assumption and some evidence to suggest that young farmers are
more innovative, motivated towards the longer term and better able to
adapt11. Maintaining their numbers would therefore enable the sector
to become more productive, competitive and viable as well as more
responsive to big societal challenges such as climate change, global
market conditions and free trade12.
Entry barriers
A number of entry barriers to farming have been identified and are widely accepted. They have complex
underlying causes and are difficult for new entrants to overcome, especially for young people at the outset
of their careers. Three of the key barriers that current young entrants to farming in the UK must overcome
are:
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Access to land. Land is the most fundamental of resources for most farming systems. Even
intensive livestock systems at present require access to land in order to recycle manures.
High start-up costs. Both the financial and personal costs of entering farming are high. Land is
expensive, both to buy and to rent (though this could change), and, with increasing technology and
regulation, the amount of capital required to purchase infrastructural equipment and machinery is
considerable. In addition, obtaining adequate education and training is costly with professional
qualifications required for some activities (such as crop spraying) and a very broad range of basic
skills required, in terms of both business management and agricultural production. Young entrants
typically must also commit considerable amounts of personal time, working long hours to establish
their business.
8
Jervell, A. (1999) Changing Patterns of Family Farming and Pluriactivity. Sociologia Ruralis 39 pp. 110-116; Shucksmith, D.
M., Bryden, J., Rosenthall, P., Short, C., & Winter, D. M. (1989). Pluriactivity, farm structures and rural change. Journal of
Agricultural Economics, 40 (3), 345-360.
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Farming in the Uplands. Written evidence submitted by Department for Environment, Food and Rural Affairs (Uplands 18).
Available online: http://www.publications.parliament.uk/pa/cm201011/cmselect/cmenvfru/writev/556/18.htm.
10
Macaulay Institute, Peter Cook, the Rural Development Company and Scottish Agricultural College (2007) Barriers to New
Entrants to Scottish Farming, An Industry Consultation for the Tenant Farming Forum. Available online:
http://www.tenantfarmingforum.org.uk/eblock/services/resources.ashx/000/244/597/58_final_report_from_contractors.pdf
11
Lobley, M., Potter, C., Butler, A., Whitehead, I., & Millard, N. (2005) The wider social impacts of changes in the structure of
agricultural businesses. Centre for Rural Policy Research, University of Exeter. Available online:
http://socialsciences.exeter.ac.uk/media/universityofexeter/research/centreforruralpolicyresearch/pdfs/researchreports/SocialI
mplications.pdf
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ADAS Consulting Ltd, University of Plymouth, Queen’s University Belfast and Scottish Agricultural College (2004) Entry to
and Exit from Farming in the United Kingdom. Report to the Department for Environment, Food and Rural Affairs.
Wolverhampton: ADAS Consulting Ltd. Available online
http://archive.defra.gov.uk/evidence/economics/foodfarm/reports/documents/Entry.pdf
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Low and uncertain returns. Most farming systems are highly capitalised (as noted above). In the
past, the return on investment has not always been competitive with alternative investments
(including placing the capital in a bank savings account), though in recent years this has not been
the case, particularly taking into account land value accruals. In addition, farm income levels (the
farmer’s salary) are low and/or volatile. Together, these have limited the financial security of farm
families and thus act as a discouragement to potential entrants.
Evidence of the financial pressures can be seen in data recorded for Scotland in the Farm Business Survey.
As shown in Figure 1, although Net Farm Income (NFI)13 levels have broadly improved 2006/07 to 2010/11,
for eight out of ten years from 1997/8 they were below the level achieved in 1993/4. Past volatility can be
seen in Figure 2 where farm business income levels per unpaid worker14 for cereal farms has dramatically
13
Net Farm Income (NFI) Net Farm Income represents the reward to the farmer and spouse for their own manual labour,
management and on tenant-type capital invested in the farm, whether borrowed or not. It is derived from the Farm Business
Income by adding back net interest and ownership charges, minus unpaid manual labour costs and a rental value for land
plus income from separable diversified activities. Further information on how it is calculated can be found in Defra (2010)
Definition of Terms used in Farm Business Management, Available online:
http://archive.defra.gov.uk/foodfarm/farmmanage/advice/documents/def-of-terms.pdf.
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Farm Business Income (FBI) represents the return to all unpaid labour (farmers and spouses, non-principal partners and
directors and their spouses and family workers) and on their capital invested in the farm business, including land and
buildings. FBI is derived from management accounting principles rather than financial accounting principals. Further
information on how it is calculated can be found in Defra (2010) Definition of Terms used in Farm Business Management,
Available online: http://archive.defra.gov.uk/foodfarm/farmmanage/advice/documents/def-of-terms.pdf.
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fluctuated in recent years alongside low income levels for other farm types, such as specialist sheep farms
(Less Favourable Areas). In Figures 3a and 3b it can be seen that among the responses to these pressures
over the last 20 years has been an increase in the land area per full time worker from 129ha to 200ha and a
decrease in the number of workers.
Although NFI levels have been better in more recent years, confidence in future income potential will take
longer to be regained. This is particularly true in the light of developing world trade agreements and major
reform to the Common Agricultural Policy (CAP), which are expected to result in increased price and
income volatility
Overcoming entry barriers
Succession – a traditional approach
Entry barriers traditionally were overcome in the UK through succession - the
gradual transfer of knowledge, skills, decision-making powers and legal
ownership between generations of farming families. Succession has become
less likely because of four effects linked to the barriers identified above:
1. Historically, low returns have meant that many farm businesses are
unable to financially support multiple generations, and so facilitate
transitions, as they did in the past.
2. A lack of available land and capital constrain the business expansion
needed to increase income earning capacity. Low returns in the past
mean that some businesses have been unable to accumulate capital
for investment, and investors (farmers, banks or other funders) lack
confidence and certainty that investment will generate an acceptable
return.
3. Low returns over many years for long and often anti-social working
hours have disillusioned some farmers and their families.
4. Financial insecurity associated with both low and volatile incomes is
difficult for families to cope with, particularly young families, and
further reduces the attractiveness of a career in farming.
There are therefore problems with both the provision of opportunity and an unwillingness to take up
opportunities by natural successors. Thus previous ‘automatic’ successors favour alternative careers and
this traditional approach to entry appears to be declining. Higher and more secure income levels and/or
increased access to capital and land are necessary to increase the feasibility of entry by this traditional
route.
‘New’ entrants’
‘New’ entrants from outside the industry traditionally either had to have sufficient capital (and access to
land) or to develop their business over time through engaging in activities that required relatively little
capital and a high level of exploitation of their own labour. These entrants can come from all age groups,
with some individuals choosing to ‘retire’ from other occupations into farming. Some will have significant
new capital they can inject, but the opportunities for those with limited financial resources are few due to
increased regulation (including that associated with the CAP) and increasing capitalisation of the industry.
Together with reduced levels of opportunity, this means that entrants from outside the industry tend to start
at a competitive disadvantage because of the need for a large amount of tacit knowledge, without which
they are likely to incur higher production costs and/or lower output levels than entrants from within the
industry. Examples include not knowing where land drains are, where stock shelter is available in severe
weather conditions, or the local prevalence of diseases.
The main challenges for ‘new entrants’ can therefore be different from those facing ‘successors’. They need
access to the tacit knowledge held within the industry and skills development opportunities in ways they did
not need in the past. Contract farming and new farming partnership arrangements, where expertise is
supplied by experienced farmers and capital and labour are supplied by a new entrant, are among the
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potential solutions, as well as the establishment of local knowledge networks and mentors (as provided in
the Young Entrants Support Scheme in Wales15).
Part time farming
Part-time farming is another route to entry and the number of part time workers has increased in recent
years (as shown in Figure 3b), though only a portion may wish to become full time farmers. Part-time
farmers can hold diverse backgrounds, have valuable transferable skills and mixed levels of capability, and
include both sons and daughters of existing farmers and people from outwith the farming sector who wish to
farm at some level. The diversity of this group makes it difficult to define and it is often excluded (by
eligibility conditions) from support measures that facilitate progression into farming – both at the stage of
becoming a part-time farmer and moving from part-time to full-time status.
Retirement
One aspect of the debate about why there are fewer young
entrants is to see the demographic problem for agriculture not as
one of a lack of young entrants but as a lack of farmers retiring
and making way for them. The ‘stickiness’ of land and capital to
older generations means it is not available for younger people.
One of the difficult issues is that the business base is also often
‘home’ to the incumbent farmer and retirement requires finding an
alternative home. Historic poor financial returns mean that some
farmers cannot afford to pass on the business as they have
insufficient funds, capital and/or income to support their retirement
including housing provision. Current tax regulations are a further
disincentive to retirement since under existing Inheritance Tax
(IHT) rules, no tax is charged on lifetime gifts to individuals (e.g. a
father transferring farm to son/daughter) but should the donor die within seven years of making the gift then
the transfer is taxed (on a decreasing scale) on the value of the farm at transfer. However, if the transfer is
made after death then it may qualify for 100% relief16.. Lifestyle farmers, which may include retired or semiretired parents living in the farmhouse, can find that let out land may not be deemed as agricultural activity
for IHT relief. These two issues, together with the fact that to qualify for IHT relief the donor has to give up
control of the business, stifle some potential intergenerational transfer of farms.
Policy interventions
A variety of support measures have been tried by countries around the world to assist entry to farming,
though none claim to have fully solved the perceived problem. Several countries have sought to address
capital requirement barriers though provision of a capital premium (including Belgium, Germany, Greece,
Hungary, Spain, Italy, France, Finland and Sweden), while others have introduced favourable/subsidised
interest rates on capital investments (including Belguim-Flanders, France, Luxembourg, Finland and
Scotland). Other support schemes encourage training and linkages to subsidised training programmes, for
example the Young Entrants Support Scheme in Wales.
Young entrants support in Scotland
Focusing on Scotland, under the 2007-2013 SRDP, support has been available through the Rural Priorities
package on New Entrants and Young Farmers. The package consists of a range of measures to encourage
more new entrants and young farmers to set up and develop profitable, sustainable farming businesses. It
15
For further information see:
http://wales.gov.uk/topics/environmentcountryside/farmingandcountryside/farming/schemes/youngentrantsupportschemeyess
/?lang=en. This scheme was recently evaluated for Welsh Government by a team lead by Dr Catherine Milne at SRUC.
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Agricultural Property Relief (APR) only applies to the agricultural value of the farmland, with any additional development
value potentially qualifying for Business Property Relief (BPR). BPR offers relief from inheritance tax on business assets,
including tenant’s capital items such as machinery and livestock. To qualify for APR or BPR defined sets of conditions apply.
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includes enhanced grant rates to young farmers (that is, farmers under 40 years of age) and a measure
dedicated to support young farmers who become head of a farm business for the first time. Interest rate
relief is also available in the form of a commercial business loan and an establishment grant. This
addresses the difficulties of raising sufficient capital to acquire and/or develop a new business that is a
barrier to young and new entrants to farming. The rate of support provided can depend on the size of the
business. In addition, successful applicants to the Rural Priorities scheme who meet the young farmer
criteria can receive a 10% Young Farmer premium for many of the funding options.
Outwith the SRDP, a New Entrants to Farming Programme is available as part of the Scottish
Government’s Veterinary and Advisory Services (VAS) Programme. Delivered by Scotland’s Rural College
(SRUC), this offers general and specific workshops and a dedicated website containing information on
successful case studies, frequently asked questions and guidance notes17. As part of this programme, a
New Entrants Gathering will be held in Edinburgh towards the end of February 201418.
Cabinet Secretary for Rural Affairs and the Environment Richard Lochhead also announced a new £2
million scheme to help new entrants (and deer farmers) in May 201319 in cases where they are ineligible for
single farm payments. The Scheme began paying out in Autumn 2013 and is now closed for new
applications.
In terms of the future CAP, EU Member States will have a mandatory National Reserve which will be
funded from deductions to the ceiling for Basic Payments. The National Reserve can be used to allocate
entitlements in cases of force majeure where people have been prevented from claiming entitlements due
to exceptional circumstances. The National Reserve can also be used to top up the value entitlements
allocated to existing new entrants with low or no historic Single Farm Payments. A consultation is currently
being undertaken by Scottish Government on the future of CAP direct payments in Scotland from 2015,
including the use of the National Reserve20.
Factors to consider in designing future policies
Fundamental to any future policy intervention by government is its justification, e.g. that market failures are
preventing socially acceptable outcomes. Barriers to entry for which intervention might be considered
include lack of access to key resources (land, capital, expertise) and returns for the resources employed
(labour, capital). However, it is less clear whether or not they are causing socially undesirable outcomes
and if there really are too few young entrants. Given the intervention
by governments of many countries to support young entrants, there
is clearly widespread agreement that there is a problem, even
though it is poorly quantified. Among the challenges to better policy
development is therefore an improvement in our understanding of
the optimum balance between the number of experienced farmers
and the number of young entrants. Evidence suggests that
experienced farmers will be more efficient than the inexperienced,
but young entrants bring youth and vitality to what is a very
physically demanding occupation. They may also be more innovative
and less bounded by existing working patterns and systems, thus
potentially more willing to adjust to changing societal goals - though
policy measures not specifically linked to young entrants could be
used to address these challenges.
17
This programme is being delivered by SAC Consulting. For more information see:
http://www.sruc.ac.uk/info/120389/new_entrants/754/support_programme_for_new_entrants.
18
For more information, see:
http://www.sruc.ac.uk/events/event/189/the_scottish_government%E2%80%99s_new_entrants_to_farming_gatheringmurrayfield.
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For more information, see: http://www.scotland.gov.uk/News/Releases/2013/05/Newentrants15052013.
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The consultation document can be found here: http://www.scotland.gov.uk/Resource/0044/00440738.pdf. The proposal for
use of the National Reserve to support young entrants is summarised on p 40.
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Assuming policy intervention to increase the number of young entrants is desired, the greatest benefits can
be achieved by designing measures that will effectively overcome the known barriers directly or indirectly,
through addressing their root causes. Among the factors that need to be considered are:
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Entry route preferences: As discussed, the barriers faced by entrants from alternate backgrounds
(e.g. successors v ‘new’ entrants) can vary. As a result, policy measures can deliberately or
inadvertently favour different types of entrant by targeting barriers that differentially affect them.
Equity v efficiency: While a ‘fairness’ argument could justify measures that support ‘new’ entrants,
an ‘efficiency’ argument could oppose it. In the short term, young entrants from within the industry
generally hold and have better access to tacit knowledge about farming in general and about farmspecific conditions. They can therefore incur lower start-up costs to obtain knowledge and can make
more efficient use of resources during the start-up period through making better decision choices
and fewer mistakes.
Support for retirement: In seeking to achieve a younger average age for the farming sector it may
be as, or even more, effective to support the retirement of older farmers as entrants into the industry.
It is clear that lack of retirement opportunity is a problem for some within the industry as well as a
lack of opportunities for the young to get started and securely established.
Loss of expertise: Experienced farmers are likely to be more efficient than young farmers because
of the body of learnt knowledge. Increasing the rate at which older experienced farmers exit the
industry could be detrimental to the industry if the loss of knowledge outweighs the increased rate of
progress and productivity that may arise from a younger demography.
Staged progression into farming: Part-time farming is a route to entry and the number of part-time
workers has increased in recent years. Transforming part-time into full-time farmers may be socially
desirable since a full-time professional labour force is likely to be a stronger base for an efficient
and vibrant industry. Therefore, measures which facilitate transition from part-time to full- time
status as well as initial entry (including with part-time status) to farming may be worthwhile.
Rural community impacts: Policy interventions can lead to side-effects which can be as important as
the intended affect. On the positive side, for example, facilitating succession conditions that enable
older generations to continue to live locally can allow younger generations to support older family
members and vice versa as needs change. Under
such conditions, there could be significant savings
in the costs of social care in rural areas and
stronger, more resilient and demographicallybalanced rural communities. By comparison,
current tax policies are negatively affecting
efficient succession in farm families.
Supporting ‘indirect’ barriers to uptake: Barriers to
uptake of supporting measures can lead to the
poor effectiveness of policy interventions. For
example, the effectiveness of support for training
and education – to reduce entry costs – may be
reduced where labour to cover essential tasks
(such as feeding and checking livestock), during
periods of training absence cannot be accessed or is prohibitively costly.
Given that EU Member States are currently finalising their Rural Development Programmes for 2014-20,
including measures to support new, young entrants to farming, coupled with a compulsory New Entrants
measure under Pillar 1, it is timely to review the issues relating to young entrants in the farming industry.
Addressing the multiple barriers to entry young entrants can face when designing future policies could
encourage more new entrants into the industry. Although there is uncertainty about the optimal number of
new entrants to farming, there is widespread agreement that they should be supported to ensure the
industry has a vibrant, sustainable future.
For more information on the work of SRUC’s Rural Policy Centre, please contact: Dr Jane Atterton,
Manager and Policy Researcher, Rural Policy Centre, SRUC, T: 0131 535 4256; E:
[email protected]; W: www.sruc.ac.uk/ruralpolicycentre
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