It was always understood that Irish farming, the sector most exposed to the UK market, would not feel the full impact of Brexit until the UK completed a number of key trade deals and goods started to flow.

Few could have expected that agri-food commodity prices would strengthen so considerably post-Brexit, dimming the farm level Brexit risk.

The launch of the Strategic Banking Corporation of Ireland’s (SBCI) Brexit Impact Loan Scheme, while necessary and welcomed by many SMEs, appears premature for farmers.

It could be argued that farmers should use this time to invest in increased efficiency or indeed farm diversification

Loans ranging from €25,000 to €1.5m are available, with loans under €250,000 capped at an interest rate of 3.7% and above that figure, they are capped at 2.75%.

A business must have experienced an adverse impact of at least 15% in actual or protected turnover or profit due to Brexit.

It could be argued that farmers should use this time to invest in increased efficiency or indeed farm diversification to mitigate the challenges that will inevitably arise.

However, there is the risk, in the beef sector in particular, that those farmers who are most exposed to Brexit may be taking on debt that ultimately will not insulate them from the magnitude of the price adjustment that Brexit is likely to bring.

For dairy farmers, it is likely that the fund, which delivers discounted pricing and unsecured finance of up to €500,000, will be attractive for dairy expansion.

Term

The maximum term of the loan facility, at six years, has received some criticism.

In terms of financing capital investment by SMEs, including farmers, a six-year term may put pressure on the cashflow of businesses that are ultimately trying to avoid and perhaps mitigate cashflow pressure.

The funding term is dictated by the European Guaranteed Fund, SBCI’s funding partner, and is not at the discretion of SBCI or the domestic banks disbursing the funds.

Increasing the term, in this instance, is not a simple fix.

Comment

While you can’t argue with the idea behind this fund, it may prove to be the wrong solution at the wrong time for farmers. The hope is that some level of Brexit adjustment funds are ring-fenced to support farmer adjustment when the full force of Brexit is felt at farm level.