Make or Brexit for UK ag investors

The National Health Service, the UK’s public healthcare system, defines cyclothymia as a mild disorder that causes mood changes, from feeling low to emotional highs. It’s an apt way to describe what the UK government must feel this week, after rejoicing at the prospects of a deal with the EU on Monday morning before making frantic efforts to rescue it in the afternoon.

But what about UK investors? Well, it’s complicated too. Farmland data do not tell an encouraging story: as we reported this week, transaction volumes are down on 2016; it would take a heroic Q4 to bring totals back up to their 10-yearly average. Land values, down 2.2 percent on the year to date and 1.3 percent on the previous quarter, are not comforting either. Savills, which produced the data, reckons Brexit uncertainty explains much of it.

Yet turn your sight to the agtech sector and there are reasons to cheer. Last week, the UK unveiled plans for a £500 million ($673 million; €569 million) park to be built in Cambridge where scientific research, business and farming will cross-pollinate to produce UK agtech champions. It’s too early to state how broad a support the scheme enjoys within the VC community (its first occupant is not due to move in before 2022). But the project surely would not have gone so public without at least some encouraging nods from UK start-ups and investors.

These two trends are not contradictory. It’s precisely because Brexit stands to create a challenge for UK agriculture – through the disappearance of European subsidies, as well as greater barriers to immigration and trade – that a technological push will be needed, to make it more efficient and more competitive. As Will Wells, chief executive of ag analytics start-up Hummingbird, told us this week, technology will be a winner whatever impact Brexit has on the sector (good or bad). His company is among the start-ups the Cambridge agtech park hopes to attract.

Yet beyond technology, investors sound less enthusiastic. Rawdon Briggs, head of rural & agribusiness at Colliers International, a real estate advisory firm, is already seeing fund managers looking at Australian agribusiness on behalf of UK investors; they could soon start looking at farmland assets as well, he told us. In fact, he expects UK private investors to start liquidating domestic assets in order to “reposition themselves” in Australia and New Zealand. It helps they enjoy “low barriers to entry”: UK investors can make investments in Aussie farmland of up to A$50 million ($38 million; €32 million) without asking for the regulator’s permission.

That may be one reason why UK pensions themselves, eager to deploy bigger tickets, will take more time to follow suit. So far, they’ve had only limited exposure to UK farmland anyway. And beyond Brexit’s eventual shape, their strategy is likely to depend on dynamics proper to other markets: as vendors hesitate, Briggs believes Australian dealflow is bound to come to a halt, with a pick-up not expected before the country raises interest rates. In years to come, mood swings probably won’t be limited to the Northern hemisphere.

Write to the editor at matthieu.f@peimedia.com