OUTSTANDING bank debt of Scottish farms has increased 5% over the past year, according to the latest statistics released by Scotland's chief statistician.

A survey of the main banks and other lending institutions has shown that outstanding loans to Scottish farms rose by £113 million in the year to May 31, 2017. Total outstanding loans to the agricultural sector amounted to £2.32 billion. Accounting for inflation, this was an increase of 3% since May 2016.

This is the eighth consecutive annual increase in Scottish farm bank debt, after it remained steady for a decade during the 2000s, but debt levels have now risen to their highest since records began in 1972.

In addition to bank loans, farms have an estimated £1.1 billion of liabilities, related to hire purchase, family loans and other sources. About 50% of total liabilities are long term loans, a percentage that has been slowly increasing over time. In 2003 about 40% of debt was long term. Liabilities equate to about 8% of assets.

This data is mirrored in the overall UK picture – figures from the Bank of England showed that, by May 2017, the UK “agricultural, hunting and forestry” sector had an outstanding debt of £18.5 billion, having seen a 57% increase in debt levels since 2010. The only two other business sectors that had seen an increase since 2010 were utilities, which increased 63%, and wholesale and retail at 8%.

Commenting on the ScotGov announcement, NFU Scotland chief executive Scott Walker said: “It is bad news that once again the level of bank borrowings of Scottish farms has risen. This is the eighth consecutive annual increase and underlines the lack of profitability across farming.

“Food and drink is Scotland’s largest manufacturing sector and requires a strong farming sector. We need to forge a new partnership between farming and the rest of the food and drink supply chain," said Mr Walker. "There is ambition to double the size of Scotland’s food and drink industry by 2030. Without successful farming this will never be achieved.”

Rural Economy Secretary Fergus Ewing commented: “It is vital that Scottish farmers can continue to access capital to invest in their businesses. These statistics show that banks are still lending to farmers, which is a sure sign of confidence in the sector.

“Although debt levels have increased to their highest level since the 1970s, the situation reflects the overall UK picture, with the Bank of England showing that agriculture is one of only two sectors to have seen consistent increases in lending in recent years. However, with many farmers relying on subsidies for a large part of their income, we must be wary of farmers getting into excessive and unmanageable debt.

“I would encourage any farmer who is experiencing financial hardship or is looking for help on increasing the sustainability of their farm, to contact our farm advisory service for support.”