Covid-19 has reduced agri-food business confidence

One third of food and agribusiness SME owners  would consider selling out
Covid-19 has reduced agri-food business confidence

A  telephone survey of 190 food and agribusiness SME owners  in June and July indicated a sharp fall in confidence compared to last year.

One third of owners of Irish food and agribusiness small and medium-sized enterprises would consider selling their business, compared to only 20% in 2019. 

The third annual Food and AgriBusiness Report published by ifac also indicates that optimism in the sector has fallen to 55%, compared to 74% last year.

The information from ifac, Ireland’s eighth largest accountancy firm, comes from a telephone survey of 190 businesses in June and July, a challenging time for many businesses, due to the global pandemic and after a country-wide lockdown.

Retirement planning (45%) and business challenges, particularly the effects of Covid-19, are the key drivers of thoughts of selling the business.

Micro and food businesses are more likely to consider selling than others,

The number who would definitely not sell has dropped below half, to 49%, compared to 55% in 2019.

The companies surveyed were 58% in food manufacturing or production, and 42% in agribusiness.

Of those considering selling the business, 45% cite retirement as the biggest factor, which tallies with a survey finding of lack of successors (only 22% of business owners have a clear succession plan in place).

Tight profit margins were viewed by 18% as a reason for sale. The impact of Covid-19 and the challenge of rebuilding after the pandemic is viewed as too much of a hurdle for 15% of owners.

“The challenges of operating a smaller business should never be underestimated,” said ifac, which added that the resilience of the sector is reflected in the proactive steps businesses took to deal with the crisis, and in a finding that nine out of 10 expect to employ the same or more people in the coming year.

The survey findings have an estimated margin of error of plus or minus 6.85%.

Revenue had decreased for over half of the businesses; more than 60% were availing of Covid-19 supports.

Environmental measures to tackle climate change continue, with managing waste and by-products, sustainable packaging, choosing environmentally conscious suppliers and engaging in energy-saving initiatives all top priorities (34% of food businesses see sustainable packaging as the top trend impacting them).

Only 48% of businesses believe they are prepared for Brexit. Almost one in five are “not prepared at all”. Medium-sized companies were more likely to feel prepared. Increased costs, tariffs, loss of UK sales and transport disruption are the main worries. Brexit, in the middle of a pandemic, is shaping up to be a perfect storm, said ifac.

The EU Farm to Fork (F2F) strategy is a critical component of the EU Green Deal which aims to make Europe climate neutral by 2050. However, 43% of those surveyed were unaware of it.

While 34% were somewhat aware of F2F, and 8% said they were very aware, 15% said it had no implications for their business.

This included 71% purchasing sustainable packaging, including reducing use of plastic; 61% choosing environmentally conscious suppliers; 56% investing in energy-saving initiatives; and 52% reducing travel

Just over half of the business owners highlighted a lack of available skills as a challenge to recruiting the right people.

Temporary lay-offs and reduced staff hours (both 33% of respondents) were the most common actions taken by SME management to deal with the impact of Covid-19.

More businesses were moving online, as offline market restrictions continued, and consumer expectations changed. There was a year-on-year increase of 54% in food and agribusinesses trading online.

2020 saw significant investment in working from home technology necessitated by Covid-19, 39% were using technology such as Zoom or Teams.

However, investment in other types of technology is still comparatively low.

Despite talk of automation to offset low profit margins, and redeploying staff to higher-value work, only 5% of respondents were pursuing automation.

Half of the businesses reported a decline in turnover, up from 19% in 2019.

A third tried to access bank finance in the past 12 months, with 87% of those succeeding.

John Donoghue, Chief Executive at ifac said: “Covid-19 is here, and the impact of Brexit is coming soon; we encourage food and agribusinesses to shore up their defences, innovate like never before, and embrace change.”

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