Further memorandum submitted by Barclays
PLC (RPA Sub 11)
1. Thank you for you e-mail requesting clarification
of what is meant by a "viable business" and to what
extent additional cost of borrowing has caused otherwise viable
businesses to become unviable.
2. In broad terms and in the context of
current circumstances, I would define a viable farming business
as one that is likely to be in a position to service its liabilities
to its lenders, and ultimately able to repay its debts.
3. In the event of a farming business facing
difficulty in servicing its debts, our specialist Business Support
Team provides specially trained managers who are able to support
and help farmers to deal with financial stress. They will work
with such businesses to help them to achieve a lasting solution.
4. In our submission to the EFRA Committee
in November 2005, I estimated the additional interest charges
that would be incurred on additional borrowed money for three
farm types, as shown below:
| Three-month delay £
| Six-month delay £ |
| 1,000 acre cereals farm
| 1,500 | 3,000 |
| 100 cow dairy farm |
200 | 400 |
| 1,000 ewe upland sheep farm
| 300 | 600 |
| |
|
5. Any additional cost inevitably reduces farm income,
and in a period where farming business have seen significant cost
increases due to higher energy prices, additional interest charges
are clearly unwelcome. However, given the current historically
low rates of interest charged on borrowed money, and the magnitude
of the additional cost in relation to other farm expenditure,
in practice the additional borrowing cost due to late receipt
of the Single Payment is very unlikely indeed to cause an otherwise
viable business to become unviable.
Agricultural Policy Director
April 2006
| 
