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Euro Borrowing - An Option For Farmers?
10/03/06

Under the new Single Payment Scheme regime, the region's farmers are having to re-think many aspects of their business, including their borrowing arrangements.

With interest rates in Europe presently running at about half those in the UK, borrowing in euros is once more an attractive option, say rural business advisers.

By combining euro borrowings with a structured loan that uses the single payment and opting for this to be paid in euros, farmers could potentially achieve a substantial reduction in borrowing costs over the next few years.

Banks are now increasingly aware of this opportunity and are trying to offer practical means for such arrangements.

Euro borrowing rates are about 2% cheaper than in the UK, which means a cost saving of around 40%.

If the term is kept relatively short and the SPS entitlement taken in euros, the currency risk normally associated with such arrangements can be avoided.

Andrew Ayre, North East spokesman for the Institute of Chartered Accountants' Farming & Rural Business Group, said: "It may require some flexible banking arrangements to accommodate this, but overall borrowings and security on offer remain the same."

Mr Ayre, a partner in Greaves West and Ayre, Berwick, added: "Some banks seem more willing and organised to set this up than others. However, if interest costs can be reduced by 40% and savings taken off borrowing over the next three or four years, that has to be good news."

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