Jeremy’s Blog 2nd September 2022: Facing the Challenges

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 1st September 2022

We said for some years that the 2020s would be decade of change and challenge for rural work, partly as we make our own future outside the EU and partly with the major changes in world markets, public tastes, technologies and climate change. That was before the pandemic, global supply chain disruption and Russia’s invasion of Ukraine. Just as the mechanics of the global supply chains might be easing, the next step in the evolutionary sequence of these shocks sees high gas prices bearing on both power and nitrogen fertiliser, with issues of cost and availability with power cuts possible.

Much has properly been made of impact of prospective electricity costs on households, already receiving some assistance – perhaps more soon – and prices buffered by the “cap”. Less has been said about business, unprotected save by the timing of its contracts and the hedging possible for larger operations. The increased working capital required for farming, for fertilisers and other matters, has been recognised for some months and DEFRA has assisted cash flow for this by bringing half the Basic Payment forward for most people. The easing grain prices, buffered only by the strong dollar, add to the pressure for combinable arable farming perhaps without bring salvation to livestock farmers.

The coming power costs will bear on farming but more so on other sectors of business, whether the glasshouse now with power costs larger than its turnover or the hotel facing a ten-fold increase. When might it be cheaper for a dairy farm to use its generator?

This renews the challenge of March 2020 – how to maintain business-to-business credit, keeping the wheels of the economy turning and contracts honoured and renewed. We have to sustain the commercial confidence necessary for activity and recovery; a failure of trust can bring the house down. Banks’ willingness to assist is central to enabling this but that may well rely on how government policy now develops to facilitate this while businesses themselves must play their part. A challenge for government in that is to design policies which will also release future growth rather than impede it – how least to foul markets - while also continuing to mitigate and adapt to climate change.

One of the greater tests of political leadership is managing and sustaining a democracy through major and now multiple challenges when there is no growth, even recession, in the economy. Many European countries failed that in the 1930s when the UK managed both growth and democracy. A souring political climate will only make all these matters more difficult.