A typical case for us has been a very large farm with over 800 milking cows. The wholesale sales price of milk had dropped to 21 pence a litre – so less than the cost to produce it. There was a lot of bank debt and the business was losing money. The bank wanted their money back. The only way to keep trading was to sell off land in parcels but this isn’t necessarily a quick process and for a long-established farm in a small community it’s a very hard thing to do. It is a very ‘public’ sign of financial trouble.

You then add to this the issue that the farm is the second or third generation of a family and the partners who are also the landowners often have different views on what should be done. Typically, in my experience, the new generation wants to invest in the latest equipment and technology so borrow and spend. That’s good when the farm is booming but can be problematic in a downturn.

A farm partnership or limited company can use the option of Administration to stop the banks and finance companies and although this is a very quick and effective and protective measure the purpose, in the end, is to repay the debt, so this does still usually result in a gradual sale of farm assets and a wind-down. However, it does give more time and is better than a forced sale.

Another option may be a Partnership or Individual Voluntary Arrangement which freezes all creditors and gives the farm time to try to turn the finances around or sell assets.