Despite widespread supply chain disruption due to the pandemic, registrations of agricultural tractors in Europe in 2021 were up 17% on 2020.  Nearly 230,000 tractors were registered across Europe in the full year 2021, the highest level for nearly a decade1.

These are the findings in a recently-published release by CEMA, the European Agricultural Machinery Association.

In the UK, the year was a story of two halves, with an increase of 25% in the number of tractor registrations in the first six months, compared with same period in 2020. However, supply issues took their toll in the second half of 2021, with registrations only marginally higher than in 2020 and 2% below average.

Overall registrations for the year were on a par with better performing recent years – but this total could have been substantially higher without the significant supply chain issues.

CEMA notes

“It was a similar story for other types of farm equipment, with the value of orders for non-mobile machinery up 17% on 2020 but completed sales only 3% higher. The backlog of orders waiting to be delivered at the end of the year was 40% larger than a year before, having also risen at a similar rate during 2020.”

John Bolton, Head of Food & Agriculture at BNP Paribas Leasing Solutions, comments:

“The release echoes our findings – orders for tractors and agricultural equipment remain very strong but production delays are having a significant impact on delivery times. With these issues set to continue, buyers will need to think further ahead when considering their purchasing plans.”

“In addition to order backlogs, the industry is also contending with spiralling production costs. Despite these challenging conditions, demand remains buoyant and we continue to work closely with our manufacturer, dealer and broker partners to support them in delivering proactive finance solutions which help drive the industry forward.”

To read the CEMA release click here

With a sustained presence in the UK agricultural industry spanning nearly 50 years, we are proud of our deep roots and a strong heritage. Our team are looking forward to catching up with established valued partners and meeting new contacts at a number of upcoming shows including:

LAMMA 2022 4-5 May

Cereals 2022 8-9 June

Royal Highland Show 23-26 June

If you’re attending a show, please get in touch with your Account Manager or contact John Bolton john.bolton@uk.bnpparibas.com to arrange a catch up.

1Report published by CEMA. 22nd March 2022. For full report please see 2022-03-21-CEMA_Economic_Press_Release_Tractor_Registrations_2021.pdf (cema-agri.org). The total number of registrations may include other types of vehicles which are sometimes classified as tractors, such as quad bikes, side-by-sides, telehandlers or other equipment. Additionally, for certain countries it can include some second-hand registrations.

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For customers with a tax year ending on 31st March, the time to review capital equipment expenditure for the current financial year is now. This will include most sole traders and individuals trading within a partnership. There is, however, a need to act fast. There are two generous capital allowance schemes available under a hire purchase agreement. In order to qualify, any equipment concerned must be on site and available for use within the financial year in which the allowance is claimed.

For those businesses in the final quarter of their financial year, the two allowances referred to above enable the full capital allowance of a newly acquired asset to be offset against tax in this financial year. The added benefit is that, under a hire purchase agreement, payment for the equipment concerned can be spread over a number of future years. The two schemes are:

 

Annual Investment Allowance

 

A capital allowance equating to 100% of the cost price of a qualifying asset can be claimed against tax in the year of acquisition. This allowance has a cap of £1,000,000 for the calendar year 2022. It is available on new and used equipment and can be claimed against both income and corporation tax. This means that all business trading styles can benefit from the scheme.

 

Super-Deduction

 

A capital allowance equating to 130% of the cost price of a qualifying asset can be claimed against tax in the year of acquisition. You read it correctly! This scheme allows a business to claim a tax allowance on a sum that is 30% more than the actual cost of the asset. By any standard, this is one of the most generous tax allowances ever introduced.

 

Whilst there is no cap on the amount of expenditure allowed under this scheme during 2022, the allowance can only be claimed against corporation tax. This means it is not available to sole-traders and partnerships. Unlike the annual investment allowance, super-deduction is available for new equipment only. It is also worth pointing out that it cannot be claimed in cases where assets are purchased for onward hire.

 

Cars cannot be included for either allowance, but commercial vehicles, plant and machinery all qualify, subject to the conditions described above.

 

Many businesses have a financial year ending March 2022, and this can act as a powerful and immediate incentive to bring forward capital expenditure to reduce any current tax liability. To benefit from these allowances before the end of their financial year, a business needs to ensure that any qualifying equipment, acquired by way of a hire purchase agreement, is ordered and delivered during the current quarter.

 

A hire purchase agreement allows businesses to acquire the equipment they need now and get the full benefits of the generous capital allowances currently available, without the need for a large cash outlay. In other words, businesses can get the tax allowances in their current financial year but spread the cost of purchase over a number of future years. A further point to note is that the interest element on a hire purchase agreement can also be offset against tax as a business expense. This means that for companies expecting to see an increase in corporation tax from 19% to 25% from April 2023, the real cost of any hire purchase agreement signed this year will reduce from that date.

 

In conclusion, and providing stock is available, there are many businesses that have a strong financial incentive to bring forward the acquisition of capital equipment. This means they will be able to retain cash for investment elsewhere. Capital allowances claimed now, on equipment subject to hire purchase agreements, provide the perfect solution.

 

Disclaimer
BNP Paribas Leasing Solutions is not authorised to provide tax advice. You should consult an accountant in order to understand the tax consequences of any investment decision.

Andy MilsomAndy Milsom, Head of Partner Training & Development at BNP Paribas Leasing Solutions

Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.

If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on 07966 114 243 or email here.

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This year will be a “great year” for farming as it tinkers on the verge of the next farming revolution, according to a robotics company. Farming is set to go digital in 2018, with the UK seeing agritech finally move from field trial to field.

Agritech start-up the Small Robot Company predicts that the technology will be commercialised within three to five years and mainstream at scale within ten.

It says commercial field trials that demonstrate robotics’ potential at scale will be completed within the next growing season.

Harper Adams University is at the forefront with such technology, with its robots and its Hands Free Hectare autonomous farming project.

“2018 will be a great year for farming. Profit, yield and the environment have been ongoing worries for years – and now there’s Brexit to contend with too,” says Sam Watson Jones, co-founder of agritech start-up Small Robot Company.

“But finally there’s light at the end of the tunnel. We are on the verge of the next farming revolution.”

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Advances in technology are key to the future of agriculture as farmers strive to feed the world with limited natural resources.

There are an estimated 570 million farms in the world and, in a neat twist of number synergy, according to Valoral Advisors, funding rounds in technological innovations along the agriculture and food value chain also raised around $570 million in 2014.

While much of this investment is directed at ag-tech startups and disruptive market newcomers, in many ways priorities remain the same as ever – innovation in resource use, especially in terms of land and water (also energy), to boost efficiency and yields. Here are five of the solutions helping to support global growth of sustainable agriculture and food production…

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Drones topped the list of AgTech investment areas in the United States in 2015. Below we bring you an overview of our report on data-driven agriculture.

A lot has been written about AgTech, and those reports often include information on innovation in the field of food production and distribution – FoodTech. However, startups in the FoodTech sector, which is an adjacent field to AgTech, do not have to deal with exactly the same challenges as those that specialise in agriculture. In addition, sums invested in this area are dwarfed by the colossal amount of capital flowing into, for example, the on-demand economy.

Hence the need to take a separate look at AgTech, which is revolutionising the farming industry through the collection and analysis of data. Accordingly, the report places 92 US startups under the microscope, examining the extent of investment in the AgTech field and seeking to identify the various trends in data-driven farming. The techniques involved include such innovations as unmanned aerial vehicles and robotics, sensors to monitor animal and crop production, imaging satellites, plus water management and weather forecasting.

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By Jean-Michel Boyer, CEO, BNP Paribas Leasing Solutions UK

Drones, also known as Unmanned Aerial Vehicles (UAV), have been used for commercial purposes since the 1980s. Over the last few decades, the technology has advanced significantly and is gaining popularity across a range of industries. A PwC global report on the commercial applications of drone technology estimates that the total global market value for drone powered solutions sits at $127.3 billion.

Infrastructure, agriculture and transport are ear-marked as the sectors with the most potential to benefit. Given that the predicted market value for drones in agriculture alone is a healthy $32.4 billion, farmers are understandably interested in applications ranging from soil analysis to crop health assessment.

The full potential of drone technology in the agricultural sector hasn’t been fully realised. However, it can already help farmers take the guesswork out of farming with sophisticated data collection and analysis. These insights can be used to develop precision farming techniques that will generate greater yields with fewer resources.  

Drone technology can help farmers boost efficiency and profits even as they battle the repercussions of Brexit, volatile commodity prices and skill shortages. Let’s take a closer look at some of the realities; the specific agricultural applications already available, their affordability and future possibilities.

Crop monitoring

A drone can take centimetre level images and traverse the whole field rather than just the perimeter. Using a multi-spectral sensor, the camera can get up close and monitor things that even the expert eye can’t detect, such as moisture, plant health, stress level, as well as things like crop density, contour problems and plant height.

Drones can survey and monitor large fields with greater accuracy than satellite imagery, and at a more affordable price. Farmers can keep tabs on their harvests (or livestock) and check critical infrastructure such as fencing remotely. Plus, time-lapse animation enables better crop management as farmers can assess and compare imagery over a defined period of time.

Water and soil analysis

According to experts at the International Water Management Institute, using near-infra-red makes it possible to identify stress in a plant, for example from pests, water shortage or disease, 10 days before it becomes visible to the eye. A 10-day warning could prevent massive crop loss and protect a farmer’s projected earnings for that season.

Infra-red analysis can also help improve crop irrigation by highlighting which parts of the field are too dry or too wet. Drones equipped with 3D mapping equipment can even provide data on soil fertility and help detect deficiencies in mineral content. Farmers can plot their crop rotation based on precise soil analysis and early detection; which means less dependence on, and more precise use of pesticides and fertilisers.

Planting and spraying

Drone planting systems are being developed that could reduce planting costs by up to 85% in developed countries. Drones equipped with sprayers can use ultrasonic echoing devices and lasers to measure distances with even more precision. This means that high-value crops are planted more effectively, less pesticides are required and the job is completed faster.

The future

Debate around the use of drone technology could delay this progress. In addition to cost, other barriers to entry relate primarily to privacy and safety issues – the biggest concern being the type and quality of data that can be captured.

Drones are however becoming much more affordable as the technology advances and key components become commonplace in other devices such as smartphones. Farming looks set to benefit the most out of any industry: The Association for Unmanned Vehicle Systems International (AUVSI), says that the use of drones in agriculture is expected to make up to 80 percent of their future commercial UAV market.

To maintain their competitive advantage in an ever-changing world, farmers shouldn’t delay investment in new agricultural technologies. Rather, they should maximise their annual investment allowance and use smart finance to access the technology they need to succeed.

We are committed to your business growth. Our competitive finance solutions can help you capitalise on new opportunities. Contact us today to discuss your needs with a member of our team.

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BNP Paribas Leasing Solutions UK

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In 2050 planet Earth will be hosting over 9 billion inhabitants. The expected 2 billion extra mouths to feed are going to pose a real challenge for agriculture.

If everyone is going to have enough to eat in the future, agricultural production will need to increase by 70% over its current level. In other words, we will have to learn to produce more with less. How can this circle be squared?

One of the possible solutions is to make further technological progress in agriculture. Agriculture has already seen two major revolutions: the first, at the time of the industrial revolution when production was mechanised; the second was the ‘green revolution’ when pesticides and other agrochemicals were widely adopted.

Now we are seeing the advent of a third revolution, one based on Big Data.

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By Jean-Michel Boyer, CEO, BNP Paribas Leasing Solutions UK

The agriculture industry faces a number of challenges in 2017: the UK’s looming departure from the EU places critical funding packages under threat, the lack of single market membership may make trade more difficult, and access to labour will be more difficult when our borders close.

Over the last few years, long-term total factor productivity has been trending slowly, but steadily upwards: between 2014 and 2015, it improved by 0.7%. Overall income from farming has been less buoyant however. In 2015, a combination of factors including lower commodity prices and poor exchange rates led to a 24 percent decline.

So how can the agricultural industry cope with this tough business environment?

Digital farming

Embracing digital farming may be the best way to boost productivity and income alike. Advances in technology have revolutionised every other industry, and farming is no exception. Machinery is becoming more efficient; big data enables identification of relevant patterns and trends; tasks that were once time-consuming are now partly or fully automated.

Next generation Global Navigation Satellite Systems (GNSS), driverless vehicle technology, and Internet of Things (IoT) technology offer the potential for colossal productivity growth. Agricultural vehicles can be automated and equipped with sensors that harvest data as well as crops – in the course of performing their basic functions, they can also collect information about plant health, soil composition, yields, and even field topography.

Drone and satellite technology can complement this work by generating millions of data points. They make it possible to analyse a lone patch of land at a 30cm resolution, offering in-depth insights into the current growing season and a comparative analysis of years gone by. Drones can also double as flight planning tools: when equipped with certain software, they can evaluate crop conditions – mitigating reliance on fertilisers and thereby boosting yields.  This technology brings a greater level of accuracy to farming, and gives the farmer concrete information to work from.

The benefits of this technology aren’t just hypothetical: they effectively take the guesswork out of farming. In Dubai, there are plans to scale up drone technology to the point where food security is completely self-sufficient by 2030. Ex-Google employees have developed products such as the American Climate FieldView, which can offer farmers real-time visibility into weather and how it affects their crops: it can track precipitation and nitrogen levels, it can even recommend nutrients to be added to the soil, and it can identify crop health issues before they damage yields.

A farm and a leg? Investing in technology with finance

The industry may well be reluctant to embrace technology. Given the level of investment it requires, their reasons are understandable. That said, the consequences of failing to adapt are too severe to ignore: lost productivity and efficiency all too often equate to lost revenue. Investing in new technology should be an operational priority. Farmers must ensure they maximise their Annual Investment Allowance, allowing them to write off plant and machinery expenditure against taxable profits.

Cashflow sensitive businesses should also investigate the various finance options at their disposal. A company that can spread the cost of their drones, their combine harvesters, and their tractors across a period of several years is a company that has far more flexibility. They’re also not committed to tools or machines that quickly become obsolete: at the end of their agreement, they can simply upgrade to a new and improved product on comparable terms.

What’s more, it isn’t limited to one vehicle, tool, or machine: farmers can use finance to invest in a comprehensive digital agriculture solution. This gives them a significant competitive advantage without causing a black hole in their finances.

The importance of this technological advantage shouldn’t be understated. A farmer who can automate trivial tasks, work from more accurate information, and boost their profits by maximising efficiency,  will be ahead of the competition.

The average farmer thinks in seasons, but the technologically-savvy farmer thinks in years and decades. If they seize the advantages before them, they’ll be rewarded with a rich harvest.  

We are committed to your business growth. Our competitive finance solutions can help you capitalise on new opportunities. Contact us today to discuss your needs with a member of our team.

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Media contact

Suhale Vorajee
Head of Marketing and Communications
BNP Paribas Leasing Solutions UK

T: 01179 100 895
E: click here

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