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Farming avoids UK's surprise economic downturn

Farming avoids UK's surprise economic downturn

Write: Leroy [2011-05-20]

Farming sidestepped the unexpected contraction in the UK economy at the end of 2010, recording only its third quarter-on-quarter expansion in three years.

The UK economy shrank by 0.5% in the October-to-December period compared with the quarter before ?rather than growing by 0.5% as economists had expected, official data showed.

The Office for National Statistics blamed the decline on "extremely bad weather in December last year", saying that were it not for the persistent snow, economic output would have shown "a flattish picture".

December was England's coldest in more than a century.

But while many industries heavily dependent on weather, such as construction, hotels and mining, saw a marked deterioration in their fortunes, the UK's farm sector raised its output by 0.3%, quarter on quarter.

Freeze impact

The freezing spell brought a number of difficulties for UK farmers, such as delayed milk pick-ups and extra feed needs for livestock kept outside, besides higher fuel costs.

The National Farmers Union last month reported cases of kerosene prices jumping 3p a litre overnight, and of 40% increases in heating oil costs.

However, the quarter also saw a jump in grain prices, with London wheat futures soaring 30% to reach ?00 a tonne for the first time, and at a time of soaring exports.

In the livestock sector, beef producers saw an 11.3% jump, to ?67.3m, in consumer purchases of the meat in the four weeks to Christmas, according to the Agriculture and Horticulture Development Board.

Declining trend

Nonetheless, UK farming still appears in the grips of a long-term decline despite the better quarter, with economic output 1.6% lower than in the last quarter of 2009.

The sector contracted for seven consecutive quarters, on a quarter on quarter basis, starting with the July-to-September period of 2008.

In London, wheat for May delivery edged ?.05 higher to ?02.80 a tonne, supported in part by a tumble in sterling prompted by the data.

The pound lost more than 1% against most major currencies, hitting a two-year low against the euro, so making UK exports such as crops more competitive.