Memorandum submitted by the Rural Development Agencies (DFoB 12)

 

1. England's nine Regional Development Agencies (RDAs) have a common mission: to transform England's regions through sustainable economic development. RDAs are uniquely placed to understand the needs of business and to deliver immediate, effective and appropriate financial support and advice to firms, especially small and medium-sized enterprises (SMEs). As private sector-led public bodies, RDAs are leading the regional response to the economic downturn and are at the forefront of efforts to support business.

 

2. RDAs are delivering vital help and support to businesses during the recession. RDAs have:

§ Provided £110 million of funding for national schemes to support business.

§ Brought forward £100 million of funding for regeneration projects to boost the economy during the recession.

§ Delivered over 51,000 free business health checks, via the RDA-funded Business Link service between October 2008 and May 2009.

§ Launched Transition Loan Funds to help businesses access finance and allocated nearly £17 million of funding.

§ Worked with Defra to increase the intervention rates for funding available through certain measures of the Rural Development Programme for England (RDPE) to provide further support to businesses affected by the recession.

§ Provided a fast and effective response to economic shocks and large scale redundancies.

 

3. RDAs have substantial experience in helping businesses, such as those affected by the collapse of Dairy Farmers of Britain (DFoB), to recover from economic shocks. RDAs provided significant support to business during the Foot & Mouth (FMD) crisis of 2001 and the FMD outbreak in 2007. RDAs have helped businesses respond to and plan for Bird Flu and Blue Tongue Virus and in summer 2007, RDAs played a vital role in helping businesses to respond to the flooding.

 

4. The potential impact of the collapse of Dairy Farmers of Britain inevitably varied from region to region, and therefore the RDA response was targeted to meet the needs of their individual regions. Each Regional Development Agency started from the same basis, identifying the likely impact of the closure. This assessment was made through working closely with DFoB and the regional National Farmers Union (NFU) and decisions on how best to intervene were also subject to discussion with the NFU. Where there was an identified need for assistance, the RDAs intervened, ensuring that effort was targeted at meeting needs and filling gaps. Where the consensus was that there was no need for immediate intervention, the RDAs kept the situation under regular review, ready to take action if the situation should required it.

 

 

Advantage West Midlands

 

5. In the first few days of DFoB going into administration, Advantage West Midlands was unable to find out how many farmers in the region were affected as DFoB staff were focussed on supporting affected businesses. Evidence indicated there were c1600 dairy holdings in the region, which, if 10% of producers where with DFoB, would mean the West Midlands had c160 farmers directly affected.  AWM was aware, however, that DFoB had a strong foothold in the region and the figure was likely to be higher. It was difficult to estimate because the West Midlands was covered by two DFoB regions which extended into Wales. DFoB, working with AWM and the regional NFU, eventually estimated that 250 - 300 farmers were directly affected in the region.   . 

6. The issue AWM originally identified was that farmers holding DFoB contracts needed to find a new milk buyer.  The administrators enabled farmers to transfer contracts quickly from DFoB.  Through AWM's dialogue with NFU and DFoB, AWM found that about half the affected farmers already had new contracts and were within the resignation period prior to administration; in West Midlands there were five or six active buyers contacting DFoB farmers and the contact details were available through a number of routes for farmers.    

 

7. The AWM business model is structured to provide business support, advice and planning to businesses.  In providing this service Business Link signposts businesses to available grants and loans. In some cases, however, Sstate Aid rules may prevent some more mainstream business related grants and loans being used to support agricultural businesses.  Due to these constraints, the Agency could not provide cash flow support to affected businesses. AWM kept the situation under constant review and was aware of a few 'at risk' farmers who, due to location and/or size of herd, may not attract a new contract.  Within a few days AWM established that these farmers were in dialogue with dairy companies.

 

8. When Defra provided figures on farmers without a contract, a couple of weeks after DFoB going in to administration, there were 16 in West Midlands.  These were being contacted with support directly by PWC.  Aware of the support and advice going to farmers to secure a new contract AWM did not need to intervene, although AWM has kept the position under review. RDPE will be able to assist in the longer term.

 

EEDA

 

9. Of the circa 170 dairy businesses within the East of England Region, the RDA working with Business Link and the NFU, initially identified only around ten that were DFoB members, of which half had already found new contracts prior to the collapse. EEDA worked with Business Link and the NFU to ensure that financial and business advice and other required support was available to those impacted, should they require it, within 48 hours of the announcement. EEDA is currently in discussions with the sector more generally about potential support through RDPE

 

 

Emda

 

10. 200 East Midland milk producers were left not only with an immediate financial loss but also with no potential market for their milk. The majority of these producers were able to secure new supply contracts but a small residual group of farmers, who were based in more remote parts of the region (High Peak and Lincolnshire) were experiencing more difficulty. Through the Business Link service, emda was able to quickly make targeted business advice available to these farm businesses and is proactively contacting them at what is a difficult time for the industry and the individual business concerned. Emda was also in almost daily communication with the NFU on the matter. The NFU assisted with spreading Business Link details and confirmed that they were content that nothing further could be done. Emda is also exploring ways of strengthening the new supply chains for those businesses affected.

 

 

NWDA

 

11. The Northwest Dairy Group met swiftly following the collapse of DFoB to determine some short, medium and longer-term actions relating to the failure of Dairy Farmers of Britain.  The short-term issues were addressed through the NWDA-funded Business Link rural team.  They were given the addresses of the 48 affected farmers in the region to contact.  They also conducted an analysis of the geographical location and litre-age of the farmers.  In addition, NWDA, Business Link and dairy industry representatives met with the regional agricultural leads from the clearing banks to gather information on their dairy clients, encourage their ongoing support and help build confidence in the sector.

 

12. It was recognised that many of the issues farmers were raising were logistical and will require a longer timeframe to resolve.  Business Link has been working with the affected dairy farmers to encourage collaboration, whilst the NWDA RDPE team has been looking into whether support can be provided for consultants such as English Farming & Food Partnerships to assist in this area.  In addition, the NWDA RDPE team is exploring whether RDPE funding can be used to support the School of Logistics at the University of Cumbria to develop a model around haulage routes and milk litre-age.

 

13. The Northwest Dairy Group has also agreed to draft a letter to Jim Fitzpatrick, Minister for Food, Farming & the Environment, to stress the fragile nature of the industry in the North West and urge the Minister to intervene on the issue of farmer guarantees.

 

 

One North East

 

14. One North East held lengthy discussions with company receivers (PWC), the Secretary of State for the Environment, Hilary Benn, and Blaydon Dairy management to try and save the dairy at Blaydon. Along with Gateshead Council and Defra, One North East prepared a package of financial assistance in an effort to secure a Management Buy Out of the operation, including the offer of a Rural Development Programme for England (RDPE) grant to provide additional finance / leverage.

 

15. Following closure of the Blaydon site, One North East focussed its attention on supporting the regional milk supply chains. One North East gave an £80,000 RDPE grant to Rock Farm Dairy in order that it could increase its capacity from 50,000 litres to 150,000 litres per day and recruit 16 people who were made redundant at Blaydon. In addition the Agency proactively encouraged farmers affected by the closure to contact Business Link to receive advice from Rural Account Managers for financial planning support and to identify opportunities under the RDPE programme such as farm diversification and skills development. One North East also worked closely with English Food and Farming Partnerships (EFFP) and the National Farmers Union (NFU) to try to match dairy farmers in the region without a market to local dairies.

 

16. In addition, One North East has funded a dairy redevelopment skills project through the RDPE Landskills project, to train 30 regional dairy farmers.

 

 

SEEDA

 

17. SEEDA worked with the NFU and CLA to try and establish the number of directly affected businesses in the region. It is SEEDA's understanding that very few farmers had contracts with DFoB and those that did have mostly found new markets. There were no processing or distribution businesses affected in the region. 

 

18. In view of concerns raised over the future of dairy farming in the South East by the industry representatives, SEEDA has undertaken to review the situation and any assistance available through RDPE for the sector for those considering leaving it.  Business Links have been made aware of the situation and are up to speed on providing advice that may be requested.

 

 

South West RDA

 

19. The implications of the collapse of DFoB in the South West were fairly limited. DFoB's Lubborn cheese plant near Chard was sold in early June to Lactalis McLelland, a major French dairy company, which will secure approximately 95 jobs on site. This will also provide an opportunity for existing suppliers - mainly located in Somerset - to renegotiate supply contracts. Apart from Somerset, the main concentration of DFoB members/suppliers in the South West is in Gloucestershire, supplying DFoB's Bridgend Dairy in South Wales.  Plymouth-based farmer co-operative Milk Link has already acquired a DFoB cheese plant in North Wales, and is one of a number of potential buyers looking to extend their supplier base.  As there is currently a shortage of milk being produced in the UK, this should put DFoB suppliers in a relatively good negotiating position.

 

20. The immediate problem faced by DFoB members is the loss of the milk cheque, in practice covering five week's supply, leading to potential cash flow problems in the short term.  In liaison with the NFU, South West RDA has asked South West REG (Business Link's specialist structure for land based businesses) to explore how they can support farmers affected by the demise of DFoB, both through the provision of business support and, as appropriate, facilitating access to RDPE funding.  In addition South West RDA has asked Duchy College, who manage RDPE skills funding in collaboration with other training providers in the region, to assess the need for any specialist training support required.

 

 

Yorkshire Forward

 

21. Yorkshire Forward, in partnership with industry representatives, obtained a list of dairy farmers in the Yorkshire & Humber region who were deemed to be 'at risk' i.e. they did not have alternative milk contracts following the cut off point from DFoB. Week commencing 26 June, Yorkshire Forward wrote out to 78 farmers offering immediate advice and an offer of up to three days of advice and guidance from a choice of agri-based consultants who had already been contacted by Yorkshire Forward. The farmers were all (78) contacted again, along with the wider DFoB farmers (186) on 8 July offering advice during the Great Yorkshire Show which ran from 14 - 16 July. They were also offered one to one clinics at three different venues around the region. These were held on 28, 29 and 30 July.

 

22. The feedback to date is that only approximately ten farmers out of the original 78 took up the offer of the three day advice and 32 farmers attended the clinics. Yorkshire Forward has agreed that those 32 will be offered the three-day advice package. Beyond September 2009, there will be no further action with DFoB farmers as a result of the crisis and all enquiries will go through the normal channels to RDPE funding where applicable.

 

 

Rural Development Agencies

September 2009