The UK’s return to recession could make credit for fresh produce businesses more difficult to come by, some experts have warned.
GDP fell by 0.2 per cent in the first quarter of the year, and projects such as Thanet Earth’s fourth greenhouse, which was announced last week, have become a rare sight since the start of the recession in 2008, due to a lack of easily available credit for investment.
Duncan Rawson, a partner at EFFP, told FPJ: “Any loss of confidence means investment banks or equity funders are less likely to invest and that puts pressure on availability and cost. The agri-food sector is somewhat counter-cyclical and it is still somewhere people like to invest in, but it has been difficult to access funding during the recession.”
Nick Tapp, head of agribusiness at Bidwells, said the move back into recession could make it hard for fresh produce businesses to invest. “Whether technically we are in or out of recession, retail sales are broadly flat and in that situation it takes a lot to justify new investment. Post the banking crisis investment was much harder to come by because the banks were much more risk-averse and it became harder to find banks willing to fund new investment across the board. The economy has not recovered sufficiently over the past three or four years to change that.”
However one banking industry source insisted banks were open for business and the move into recession would make little difference to individual investment decisions. “We look at each proposal on a proposal-by-proposal basis and clearly if it meets our criteria then we are happy to lend.”
The move into recession had not shocked the markets and was unlikely to change financial institutions’ investment decisions, the source added. “Given the number we are talking about is -0.2 per cent, we are talking about a technical recession. We’re not talking minus two per cent or minus three per cent as it is in wider Europe, and so given there weren’t any significant movements in the equity markets or the bond markets or the loan markets, it suggests that while this was not priced in exactly, it would seem to indicate flat lining rather than recession.”
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