Unbroken Threads? Succession and its Effects on Family Farms in Britain

Unbroken Threads? Suecessim and its Effects on Family Fnrms-in Britain

Clive Potter and Matt Lobleye

AMILY FARMING REMAINS the most hereditary of professions. It has been F estimated that over 80 per cent of current English and Welsh farmers are from farming stock (Gasson et al. 1988), while in France Perrier-Cornet (1986) has calculated that 90 per cent of farmers installed since 1970 are either sons or sons-in-law of farmers. Researchers have long been interested in explaining the apparent efficiency with which land and business assets are transmitted between generations and there have been a number of studies such as those by Harrison (1975), Hastings (1984) and Hutson (1987) in Britain and Commins and Kelle- her (1973) in Ireland investigating the strategies farmers adopt to ensure continuity, if not of the home farm itself, then of the family occupation in farming. It is a process which is becoming more difficult all the time.

As Hutson (1987) has pointed out, a rapid inflation of land values and rents, the high start-up costs of capital intensive farming and the wide profit margins needed to repay interest, mean that setting up sons on farms of their own is now an option few can afford. High land and capital values also make it very costly for a successor to buy out the interests of other family members (and exacerbate family tensions if they do not). One solution followed by British farmers has been to move towards incorporating all willing heirs within an expanded family firm, a strategy which is resulting in ever more family partner- ships and increasing numbers of two-generation farms managed by fathers and sons (Whatmore et al. 1990). Symes (1990) comments that patterns of succession and inheritance continue to adapt in subtle ways to changing economic conditions, effectively reconciling the desire for family continuity with the demands of capitalist agriculture. “Bridging the generations” is increasingly a matter of securing a smooth transfer of managerial control through succession rather than, as before, simply bequeathing the wherewithal to practice farming

‘Wye College, University of London, Ashford, Kent, UK. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 lJF, UK and 238 Main Street, Cambridge, MA 02142, USA.

Q 1996 European Society for Rural Sociology. Sociofogia Rurdis Volume 36, No. 3, 1996

ISSN 0038-0199

Unbroken threads? Succession and its effects on family farms 287

via a division of patrimony at the moment of inheritance. But this is more easily accomplished on some farms than others and there is a growing recogni- tion that the rate of succession to family farms will be a key determinant of future structural change in the industry. As Marsden et al. (1992) point out, economic marginalization more often reveals itself in a failure of succession than through abrupt extinction due to bankruptcy or illiquidity. Even so, there are few reliable estimates of the likely level of succession, with sample surveys estimating the proportion of farmers in the UK with a successor at anything between 30 per cent and 70 per cent (Gasson and Errington 1994).

Leaving aside situations where the farmer does not have any children or suitable heirs, a successful transfer is a function of both the potential successor’s willingness and ability to take up the reins of managerial control and the farmer’s readiness to give them up. The former is very closely related to the income earning potential of the farm and the opportunities for off-farm employment, researchers agreeing that small farms in economically buoyant locations stand the greatest chance of extinction on the death or retirement of their current occupiers (Bryden et al. 1992). Hastings (1984), for instance, discovered that managers of larger farm businesses are best placed to acquire extra land to accommodate sons and agrees with other researchers that farm business size is an important factor determining the chances of a successful transfer to the next generation. Marginal farms in poor farming regions consequently face the bleakest future, though as Fennel1 (1981) argues, succession to these farms may be the only available employment option for farmer’s sons, producing rates of succession that may actually be higher than elsewhere despite considerable uncertainty concerning their long term viability.

Indeed, not only is succession less likely on economically marginalized farms, its delay or non-occurrence may weaken the incentive to restructure or expand the business in ways which would ensure survival. Agricultural econo- mists (see, for instance, Furness 1983) have long argued that the business trajectory of family farms is strongly influenced by previous levels of achievement, poor performing farms having fewest opportunities to develop, which means in turn lower incomes and greater difficulties in financing investment. Those with higher incomes and enterprises operating at higher levels of efficiency on the other hand are the most likely to expand, further specialization and in- creases in business size reinforcing success. One of key factors determining whether a farmer enters a virtuous or vicious circle of farm development is the farmer’s own route of entry into the industry, including initial endowments of land and capital and levels of borrowing - all factors connected with the succession and inheritance processes. Pursuing this theme, studies such as those by Bryden et al. (1992) have sought to explain different farm business trajectories in terms of family dynamics as well as more strictly economic influences, though their analysis of farm household adjustment strategies makes only indirect reference to the influence of succession.

The vicious circle of uncertain succession leading to under-investment which

288 Potter and Lobley

stifles business growth and makes it less likely the farm will be passed on, was first identified by Clarke, (1976), who discovered that simply delaying succession - most likely on holdings that are insufficiently profitable to provide parents with the means to finance early retirement aad yet too small to support two families - was itself a factor in under-investment ilLIQ nzitsed business opportunities. There is also survey evidence to suggest that the farm management histories of farms are profoundly influenced by knowledgethat a successor does not exist or cannot (should not) be persuaded to take over, ‘differences between successor and non-successor farms often (running) deep, the adaptations to a failure of succession that are made by the farmer quite early in the life cycle determining the choices and opportunities that are h e r available to him in retirement and old age” (Potter and LoMey 1992, p. 141). The corollary is that on larger, economically more secure farms, the very p rwss of planning for, and carrying through, succession injects new ideas and energies into the business and provides a spur to expansion. Symes (1972), for instance, discovered that the presence of a successor was a powerful incentive to intensify production and expand the farm, leading Hutson (1987) to the simple, but surely accurate, conclusion that children provide both a means and an incentive to expand production. On the other hand, as Marsden et al. (1992) argue, the need to accommodate the interests of family members and emure succession may actually reduce the autonomy and independence of the family farm by requiring heavy borrowing and increasing dependence on input suppliers and the food industry. Their research supports the idea that it is the economically most secure farmers operating larger or medium-sid bwinesses who find succession easiest to achieve and there is strong evidence to suggest that ‘estab- lishment strategies’ and farm business growth are mutually reinforcing. Never- theless, by involving the farm family in more dependent relations with external capital, the process of succession can transform the MtW of the farm itself, with the ironic result that the survivors are those most subsumed to external influences.

Succession, then, is “both an effect of previous causes . . . and a cause of subsequent effects” (Nalson 1968, p. 22), some of them evidently very long term indeed. True, succession strategies are heavily iduenced by, and partly adaptations to, prevailing economic and market conditions. But to paraphrase Hutson (1987), the process of succession also impresses something of its own structural and motivational pattern on the way farm businesses develop, defin- ing key transitions when farm restructuring is most likely to occur and furnish- ing the incentive to act. It is reasonable to assume that successor farms consequently tend to follow trajectories which are systematically different from those on which succession has failed or been ruled out. Three likely influencing factors suggest themselves.

First, there is the ‘succession effect’ mentioned above. This describes the impact the expectation of succession has on farm business development. There is already some evidence that farms may be expanded or restructured over long


periods to provide a living for the successor and hidher family on the farm or to generate sufficient capital to establish children on separate holdings. The succession effect is likely to be strongest on farms where succession is carefully planned and could date from the birth of the farmer’s first child, though it is more likely to obtain once a successor has indicated his or her willingness to return to the farm.

Second, there is the ‘successor effect,’ which is the impact successors themselves have on assuming partial or total management control. It has long been recognized, even if only anecdotally, that young farmers tend to be most inno- vative at the start of their farming careers. Blanc and Perrier-Cornet (1993) remark that one of the hypotheses behind the EU’s farm modernization schemes is that younger farmers are agents for modernizing agricultural struc- tures and so deserving of special aids. In practice, the influence a successor actually exerts may be gradual or sudden, depending on the process of succession itself and how efficiently it is accomplished. In some cases, a successor’s entry into the business may be a smooth progression, extending from the time he/she leaves full-time education to work on the farm to the moment of legal inheritance of the business. A progressively stronger successor effect is likely to be observed as the successor climbs the ‘succession ladder’ and assumes more managerial responsibilities. Evidence for this comes from Hastings (1984), who observed examples of expansion, new enterprises and improved margins as a result of a son’s involvement in the business. Commins and Kelleher (1973) also detected greater dynamism and more innovation on farms in the process of being taken over by the next generation. In other cases, however - and this tends to happen most frequently on small, economically marginal farms - succession may be so long delayed by a father unwilling to retire or cede control, that the successor effectively becomes what Gasson and Errington (1994) call a ‘farmer’s boy,’ with little influence until the father’s death finally trans- fers managerial control. There might then follow dramatic business and land use change as the new operator sweeps clean, though equally a chronic lack of investment and preparation could mean that the successor is hamstrung long after father has left the scene.

Finally, there is the ‘retirement effect’ which obtains at the end of a farmer’s career. Farmers lacking successors may at this point decide to run down their farms, or at least extensify production in some way, with a view to reducing the number of hours worked. Symes (1973, p. IOI), for instance, has found that land on farms without successors tends to be less intensively farmed, “the production cycle (declining) . . . closer to a subsistence mode (in old age) than at any point in the life cycle.” Crow (1986) similarly observed a period of decline and disengagement on non-successor farms as old age approaches. The process tends to begin with a reduction in the number of hours worked and in the repair and maintenance of machinery and equipment, but may culminate in the sale or reletting of land.


Methodology

In order to investigate these effects more systematically and in greater detail, a survey of 504 farm families in Britain was carried out in late 1993. Sampling was conducted on a cluster basis, with respondents identified from field books supplied by the Institute of Terrestrial Ecology detailing the ownemhip of land within selected 1 km grid squares across Great Britain. These squares were widely scattered across the country to represent a range of farming regimes and landscape types. The resulting sample presents a good cross-section of farms of different type, size and occupancy (for further discussion of the representative- ness of the sample, see Potter and Lobley 1996). Face-to-face interviews were conducted with all 504 farmers to generate information about succession status, farm family structure and management history. In the analysis which follows, data from these 504 farms is used to describe the pattern of succession and to assess the strength of association between succession status and management change. Qualitative case study data drawn from extended interviews with a subsample of ninety-one farmers selected to represent different categories of succession, are then drawn on to exemplify some of the causal processes involved.

A first step was to categorize respondents on the basis of their current succession status. This is a difficult task given the complexities of the succession process, particularly on two-generation farms where either the father or son may present himself for interview as ‘the farmer.’ In theory, this could mean that a farm being managed by a young successor but notionally still owned by his elderly father, could be mis-classified if the father is interviewed alone. Very different responses and rationalizations could be given, producing an inaccurate picture of the farm business and its mode of operation. In order to avoid this, care was taken at the commencement of the interview to ensure that the re- spondent was the current manager of the farm and the person responsible for all day-to-day management and longer term investment decisions. In cases where father and son were genuine partners in the business, sharing decision making and investment planning, every effort was made to ensure that both were present, responses to questions being agreed between them. So far as the categorization of farms by succession status was concerned, the approach used here follows Fennel1 (1981) in assuming that succession is most assured where the successor is actually working on the farm alongside the farmer. We have in addition specified that the successor must be 18 or over. On this basis, respondents fall into one of the following five categories: I. Successor on farm: successor aged 18 or over has been identified and is cur-

2. Successor not on farm: successor 18 or over exists but is currently not work-

3. Succession uncertain: potential successors exist but it is unclear whether they

rently working on the farm.

ing on the farm full time.

wish/are able to become farmers

Unbroken threads? Succession and its t$ficts on family farms 291

4. Too early: farmer has no children yet or children under 18. 5. Succession ruled out: farmer does not expect to hand the farm or the occu-

pation of farming over to a successor.

The pattern of succession

Table 1 gives a breakdown of the sample in these terms. It can be seen that just 29 per cent of farmers in this sample had an identified successor (successor on farm plus successor not on farm categories), more than half of whom currently work off the farm. Compared to other surveys, this represents a rather small expected rate of succession. Harrison (1975), quoted in Gasson and Errington (1994), estimated that two-thirds of his sample had a successor “positively identified, ready and available,” though he does not specify whether all of these were over 18. Marsden et al. (1992) found that 50 per cent of their respondents said that succession ‘was likely,’ though again they employ a rather more liberal definition of succession than the one being used here. Indeed, the present survey shows that an almost equivalent proportion of respondents have ruled out inter-generational transfer, either because no successors exist, their children are unwilling or unable to return to the farm to become farmers or they have dissuaded them from doing so. For 26 per cent it is too early to say, chiefly because they are at an early stage in the family life cycle or have yet to marry or find a partner. A few respondents in this category shade into the large middle grouping of farmers for whom succession is ‘uncertain,’ usually because children over 18 have yet to commit themselves.

Table 1: Distribution of survey farmers by succession stztus

Succession status Yo of farmers

Successor on farm 12.7 Successor not on farm 16.0 Succession uncertain 22.2 Too early 25.5 Definitely no 23.6 Total 100.0

Source: Farm Survey

Significantly perhaps, in 24 per cent of cases, succession appears still to be unresolved at the end of a farmer’s working career (see Table 2), with 32 per cent having ruled out succession altogether at this point. These farmers, togeth- er with 30 per cent of middle aged farmers who have definitely ruled out succession, are presumably people without children or suitable heirs or those who have taken a clear decision not to pass the farm or the farming occupation on to their successors. Looking at the column percentages shows that the vast majority of farmers with successors present are middle aged - these are the two-

292 Potter and Loblqy

Table 2: Farmer succession status by age grorcp

Column % Successor Successor Succession Too Definitely All ROW Yo on farm not on farm uncertain early no farmers

under 35 0.0 0.0 0.0 45.5 3.6 12.7 0.0 0.0 0.0 93.2 6.8 100.0

35 - <45 6.0 3.9 0.0 54.5 8.0 17.1 3.7 3.7 0.0 81.5 11.1 100.0

45- <55 36.7 28.9 55.8 0.0 37.5 30.4 15.3 15.3 40.3 0.0 29.2 100.0

55- C65 35.0 36.8 25.0 0.0 27.7 22.4 19.8 26.4 24.5 0.0 29.9 100.0

65 and over 21.7 30.3 19.2 0.0 23.2 17.3 15.9 28.0 24.4 0.0 31.7 100.0

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Farm survey

generation farms referred to above, though in 22 per cent of cases the farmer is still in harness aged 65 or over. It is also interesting to note that in 30 per cent of the cases where the successor has been identified and is not working on the farm, the farmer is 65 or over, prompting the speculation that many of these are small farms on which succession is being delayed until the farmer’s death. Nearly all successors are male, with 86 per cent of the twogeneration farms being managed by father and son teams. As Figure 1 shows, nearly all direct successors are closely related to the previous occupier with only a hand- ful of people taking over a farm from a more distant relative. Table 3, showing the relationship between succession status and the farmer’s retirement status and plans, indicates that, far from facilitating full retirement, having a successor present on the farm appears to discourage it, with 30 per cent of farmers in this category determined never to retire from farming. Fifty-three per cent of those

Table 3: Succession status and retirement pkans (column/percentages)

Successor Successor Succession Too Definitely All on not on uncertain early no farmers

farm farm

Never retire 30.0 19.2 23.1 17.5 13.8 19.7 Will retire eventually 23.3 24.7 28.8 42.5 53.2 36.7 Will se&-r&re eventually 38.3 38.4 27.9 39.2 18.3 31.5 Already semi-retired 6.7 15.1 18.3 0.8 9.2 9.7 Already semi-retired and 1.7 2.7 1.9 0.0 5.5 2.4 plans to fully retire Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Farm survey. The association between succession status and retirement plans was significant at 5% using Chi-square.

Unbroken threads? Stlccession and its effects on family farms 293

Figure 1: f i e relationship of direct successors to theprevious occupier of thefarm Source: Farm survey

without a successor are planning to retire at some point and younger farmers in the ‘too early’ group seem to regard full retirement as a more desirable prospect than their more elderly counterparts (43 per cent saying they expect to retire at some point)

Using a classification developed by the ITE (see Barr et al. 1993), it was possible to identify whether respondents were located in arable, ‘pastoral’ or upland locations’. Figure 2 compares the succession profiles of farmers in these terms, revealing that upland farmers are much the most likely to have a successor present on the farm (22 per cent compared with 12 per cent of arable farmers and just 9 per cent of farmers in pastoral landscapes). The preponder- ance of two-generation farms here bears out Fennell’s (1981) observation that succession to a farm may be as much a matter of push as pull, the high percentage of successor farms in marginal upland locations being as much a reflection of limited alternative employment opportunities as of the attractiveness of farming as a means of earning a living €or the individuals concerned. Similarly, the National Westminster Bank survey (1992) found that farms in south-east England were the least likely to have a successor whereas the highest rates of succession were found in northern England, Wales and west Scotland. In support of this, only 14 per cent of upland farms have ruled out succession compared to 27 per cent and 25 per cent of farmers in arable and pastoral landscapes respectively. However, there are also significantly more farmers in the


25

20 22 E 5 15 I

* 10

5

0 Arable Pastoral Upland All farmers

LandscapeType

Osuccassor on farm Uncertain Definitely no

Successor not on farm

Figure 2: Succession status by landscape type. Source: Farm survey and Countryside survey

'too early' category in arable landscapes, a reflection of the younger age profile of farmers in these locations but also, conceivably, a product of the earlier and more decisive succession that is possible on the typically larger and more profitable farms found here.

Indirect support for this hypothesis comes from Table 4, which shows clearly that a high percentage (50 per cent) of farms that have been recently acquired or taken over (i.e. those in the 'too early' succession category) enjoy turnovers in excess of f100,OOO. Similarly, in cases where a successor is present on the farm the businesses are likely to exhibit high turnovers. Indeed, as Table 5 shows, non-successor farms are much more likely to be managed on a part- time or hobby basis (though a high proportion of farms where the successor

Table 4: 'The association between succession status and f irm business turnover (column/ percentages)

Annual Turnover (1992) Successor Successor Succession Too Defkitely All on not on uncertain early no farmers

farm farm

< €20,000 3.6 29.9 26.3 14.8 35.0 22.9 €20,000 - < €50,000 12.5 19.4 21.2 13.0 17.0 16.7 f50,OOO - < f;lOO,OOO 32.1 19.4 18.2 21.7 17.0 20.8 2 ~100,000 51.8 31.3 34.3 50.4 31.0 39.6 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Farm survey. The association between succession status and turnover was significant at 5% using Chi-square.


Table 5: Succession status and dependence on farm income (column/percentages)

Successor Successor Succession Too Definitely AU on not on uncertain early no farmers

farm farm

Full-time (2 904b)" 84.7 49.3 59.4 62.4 52.8 60.2 Class I (50 - <YO%) 11.9 20.0 16.8 16.2 26.9 18.9 Class (10 - <%yo) 3.4 13.3 15.8 17.1 10.2 12.8 Part-time (< 10%) 0.0 17.3 7.9 4.3 10.2 8.0 Total 100.0 100.0 100.0 100.0 100.0 100.0

'EProportion of total household income from farming. Source: Farm survey. The association between succession status and income class was sipficant at 5% using Chi-square.

is not present are also part time or hobby, confirming the suspicion above that many of these farms are too small economically to be managed as two-generation farms). Successor farms are overwhelmingly full-time agricultural businesses.

Succession, successor and retirement effects

If our earlier analysis is correct, developmental differences between farms should also be explicable in successional terms. To investigate this further, the management histories of survey farms were constructed from farm survey data describing investment patterns, input use, enterprise restructuring and changes in land holdings over a 20-year period. Five different farm management trajectories were identified based on an adaptation of a typology devised by Bryden et al. (1992). These were: 1. Recent Development: where the business has been subject to significant land

use change and intensification since 1978 from a low base and where a gener- al re-equipment is being carried out with a view to increasing the income earning capacity of the core agricultural business.

2. Consolidation: farms which have experienced further investment and expansion since 1978 from an already high base.

3. Stabilization: farms experiencing very little or no change in business terms since 1978 and where the share of household income from agriculture has remained the same.

4. Disengagement: farms where non-agricultural enterprises have been intro- duced or greatly expanded and/or off-farm employment taken up since 1978 in order to reduce dependence on the core agricultural business.

5. Withdrawal: farms experiencing some extensification of production and/or disinvestment since 1978 as managers actively seeking to reduce labour input.

Figure 3, which cross-tabulates a farm's management trajectory against its succession status, shows that consolidation, for instance, is most likely to be taking place on two-generation farms, where succession and successor effects


Successor Succercor Uncertain Too early on farm not on farm

Succession status

Dmmbly All h rmen no

OWecent) Development @Consolidation @Stabillratton

Figure 3: Farm trajectov by succession status Source: Farm survey The association between farm trajectory and succession stam was significant at 50/0 using chi-square

might be expected to operate. More specifically, the evidence of Figure 4 and Table 6 is that the presence of a successor is strongly associated with an ex- panding and ‘professionalizing’ pattern of farm business development (i.e., where commitment to the core farm business as a source of family household income is being increased through investment, improved marketing and/or training). Some 58 per cent of farms with a successor present have experienced an increase in the area farmed and 80 per cent an increase in the intensity with which the land is farmed. Although causation is complicated (these farms may have a successor present precisely because they are economically successful),

Table 6: Investment activity and land acquisition (1978-93) by succession status

Successor Successor Succession Too Definitely All on not on uncerrain early no farmers

farm farm

YO undertaking significant 80.0 52.6 61.9 72.7 55.4 63.9 capital investment 9’0 acquiring land 58.3 23.7 41.0 49.6 33.0 40.7

Source: Farm survey. The association between succession status and land acquisition was significant at 5% using Chi-square.


there is evidence from a large number of case studies that the expansion over many years characteristic of such farms has been motivated by the need to ensure family continuity. The succession effect can be clearly seen in the following example:

Mr A had been anticipating the moment when his son would return from full-time education to work on the farm for several years. When, in his mid-teens, the successor indicated that he wanted to come into farming, his father expanded the business by 283 ha and took the decision to go out of dairying and expand into sheep and beef. Exten- sive re-equipping of the new land (new buildings, draining, reseeding, fencing etc.) was undertaken over the following 5 years. In 1984 the successor was made a full partner in the much expanded family business and since then has married and purchased further land. The environmental impact of this is very clear: environmental change on the farm over the last 20 years falls into two main episodes of land improvement and intensification; the first following the major expansion of 1974; the second following more recent land purchase of the successor. (Farm with successor present)

The pattern of Mr. B’s farming career testifies even more strongly to the influence of the succession effect:

Working in agriculture since 1932 (with a break for the war) this farmer bought his first farm in 1952 and moved to his Current farm in 1976. On acquiring the farm he embarked on a programme of development and further expansion, increasing stock, erecting new buildings and increasing overall intensity. The farmer has two sons successfully incorporated into the business who are now responsible for much of the day-to-day running of the farm. They each have a quarter share of the business, being made partners in 1989, their father retaining the other half share. Two houses have been built on the farm to accommodate the sons and their families. The dairy enterprise has been increased to support the families and extensive use was made of the AHDS scheme to purchase machinery which would not otherwise have been acquired as the sons came to the farm. The farmer claims to take little account of agricultural policy, his main concern being to provide for his sons. In his early years his main interest was in maxi- mizing profits and “the thought of the future was a grey area. However, once married and with children of my own, my ambitions became stronger to provide a good stan- dard of living, and improve the value of the farm. Once both sons definitely wanted to come home then expansion and improvement plans came to fruition.” (Farm with successors present)

In some cases, a farmer has worked towards establishing the successor as a farmer in h idhe r own right, setting him/her up on another farm which, to use Hutson’s (1987) description, becomes a ‘stand-by holding,’ run separately by the successor but possibly linked to the home farm through shared input purchasing and machinery use:

Mr C is now in his late fifties but, with four sons, has clearly been driven by the need to increase income to provide for multiple successors and non-succeeding heirs. S e t up on his own farm by his father in 1960 at the age of 24, he acquired another holding in


s ~ ~ ~ . ~ ~ ~ ~ On Succscwr Uncefbin TOO H*, D.RnW no AY famen hrm not on knn

Succscsbn a w s

Figure 4 Change in holding d7ea (1978-1993) by succession status Source: Farm survey The association between farm succession status and change in holding area was significant at 5% level using chi-square

1963 at which point he w a s married and had a young family. Since then he has bought another farm and continually expanded the ‘home farm’ through a stcldy programme of capital investment and re-equipment. To help meet his debt burden and to generate extra income, in 1970 he acquired a milk round and livestock trading business. The farmer has carried out a very extensive improvement programme, erecting, extending andor improving buildings for many years, enlarging fields and reseeding around 20 ha per year. According to the farmer, *because I’m in partnership with two sons we’re in full swing, we are going forward If I was on my own thing would be very different. I wouldn’t have bought the new farm for a start.” At the moment the farmex is taking only a minimal income from the farm to enable further capital investment and to release capita for his non-succeeding sons. If two sons had not chosen careers outside farming, “we would have had to buy another farm or two, but although it has helped in not having to buy four farms, I’m conscious that there are two sons due capkat out of the business which I shall pay out as soon as I can.” (Successor on farm)

The corollary of this is the new blood effect that is felt as young successors take over. From Figure 4 it can be seen that a very high proportion of the young farmers who fall into the ‘too early’ succession category have embarked on the development and re-equipment of their farms in recent years. Forty- eight per cent of such farmers have expanded their holdings (and 70 per cent

Unbroken threads? Succession and its efects on family farms 299

undertaken new capital investment). In some cases this is occurring where a successor has been set up on a stand-by holding. The following is a more dramatic illustration of the successor effect at full stretch, though other less ex- treme examples could also be quoted:

Mr D’s father had steaddy built up the home farm since the 1950s and had brought a second farm 20 miles away in 1980. On returning from college in 1987, his son took over from the farm manager on the second farm and, in consultation with his father, decided to set up a large scale poultry enterprise of 140,000 birds and intensdy the arable enterprise. There followed extensive re-equipping of the farm; new building and infrastructure, field enlargement and reseeding. Indeed, over a 3-year period, over 20 ha of grassland were converted to arable and significant amounts of capital were invested in buildings and equipment. Looking to the future, the successor sees a great deal of potential for intensdying production on his father’s farm which he hopes will be fully incorporated with his when his father retires but at present his main aim is to maintain or increase the capital value of the business. (Successor recently taken over)

More usually, however, the successor effect is felt only after the successor has climbed enough rungs on the ‘succession ladder’ to be able to wield some sort of influence over the way the business is run. In some situations this transition is very well defined and our data reveal that over 9 per cent of all capital investment, 6 per cent of all land purchase and 8 per cent of all enterprise changes recorded on survey farms over a 30-year period took place within a year of the successor’s return to full-time work on the farm. The formation of a partnership between father and son(s), usually regarded as the big watershed in successional terms, followed on average 6 years later, and while still an important trigger event, is less significant in terms of its impact on farm management and land use. In the following example it can be clearly seen that the entry of a successor into a business has a very definite impact on its trajectory, heralding the onset of a period of expansion and change:

Mr E’s business is an example of a two generation farm (with father and son working side by side) following a trajectory of episodic development. Father had been working full time on the farm for 30 years before he became a partner in 1974. There is little evidence of any major change during this period although some land was added as the father was incorporated into his father’s business in the 1950s. In the late 1970s there was some minor land improvement and conversion of arable land to grass as stock numbers increased but the business was becoming increasingly constrained by escalating debt. In 1984 the current farmer’s son returned to the farm after college, was quickly incorporated into the business and instigated a phase of rapid development. The main motivation to developing a more viable business was the son’s need to gain a living from the farm for himself and his family. However the farm was also under external pressure from the bank so that when a full-time worker left he was not replaced in an effort to trim costs. In 1987 the family sold their farm house to repay debts and now have only a ‘working overdraft.’ This liquidation of assets not only allowed the business to survive but also financed an increase in mechanization alongside increasing stock, and

300 Potter and LobLey

improvements to the land and fertility. There was as0 s o m e restmcturing 1cco91p?1)y- ing these changes and the farmer went out of potato production rathp than committing the capital that would have been required to maintain this as a viable enterprise. Father will semi-retire in the near future and although his son has ap expansionist outlook and would like to enlarge the farm and develop ah intensive bull beef enteprise, big chaages are not envisaged as the son has already clearly had a chance to make ‘his mark‘ on the business. (Farm with successor present)

More complicated is the situation on some two-generation farm in the sample where succession has been delayed owing to the father’s reluctance to retire, the new farmer then being confronted with the legacy of years of under-investment. Again the successor effect may be strongly felt:

Mr F was initdy rapidly promoted and made a quarter partner at h e age of 21, but failed to progress any further up the ‘succession ladder’ becruse of father’s anxiety to retain financial control. Full managerial control e v e n d y p d to him after 24 years of working on the farm, on his father’s retirement in 1988. According to the farmer, “father was too old when he finally retired He had made some awful buriness decisions and the business was in a mess - overborrowad, and this was compounded by the fact that my sister was given a house and land which she did not need.’’ In the 5 years which followed, field enlargement was carried out and substantd under-drainage undertaken with grant aid However, his father’s debts stiU hvnrtring the business and the farmer has been unable to make a l l the changes he had planned (Farm recently taken on by successor)

Very often, indeed, the ‘farmer’s boy’ turns out to be just as conservative as his father and his late succession to the farm heralds no very great change in farm management practices:

Mr G ‘ s father remained firmly in control of the business almost until hit retirement in 1980. Now 49, the farmer began working for his father on their d?ir, farm in 1960 and until 1980 laboured on the farm as a classic ‘farmer’s boy.’ In that year the farmer married and his first child was born. The farmer admits that although he now enjoys full management control, the business is managed little differently from 26 years ago. There has been some development of the dairy enterprise, cut short by the introduction of quotas, but the overall impression is one of consolidation from a low base, and only 10 years after his father retired the farmer, at least in terms of his mental attitude, has begun to wind down. h d improvement has been confined to some underdrainage of fields, with the field pattern remaining exactly what it was in his father’s day. (Farm recently taken on by successor)

Elsewhere, however, succession is being deliberately delayed because the business is economically too small to provide a living for two families. We have already speculated that many of the farms with an identified successor who is not present on the farm fall into this category, the successor’s return to the farm being unlikely to take place until the farmer’s full retirement or death.

Unbroken threads? Succession and its efects on family farms 301

There were also some intermediate cases where the successor worked only part time on the farm and had done so for some time, in some cases merely helping out at peak times, but in others acting as a full partner in the business and planning to become a part-time farmer at some future date. It can be seen from Figures 3 and 4 and Table 6 that these farms with absentee successors have some of the flattest recent management histories, being very unlikely to have either carried out investment or acquired or sold land since 1978. Lacking either the ability or incentive to expand production, but needing to keep op- tions open for the time the successor eventually returns, even if only on a part- time basis, these are amongst the most stable and least dynamic farms in the sample, as the following example demonstrates:

Mr H manages a small farm in semi-retirement and his son spends approximately 3 months a year working on the farm. The rest of the latter’s time is spent working off the farm although even then he may work up to 20 hours a week ’helping out.’ The farmer inherited the tenancy of the farm from his father in 1957 and bought the farm simultaneously. From that point his main concern was to pay off farm debts which significantly delayed the development of the farm, and restricted capital availability for on farm investment and diversification. Very little land improvement was carried out in these years and the farmer describes his management style as ‘farming in a low gear.’ In 1992, however, the farmer semi-retired and the farm was converted from livestock to arable to fit in with the son’s off farm work. This involved some hedge removal and an ‘intensification of the system.’ It seems clear that, otherwise, the farm would have remained grassland based. The successor would like to have a larger full-time farm business but expansion looks difficult and although it would be possible for him to draw a sufficient income from the farm alone, he finds it easier to earn a guaranteed wage off the farm. (Farmer semi-retired with a part-time successor)

It is a reasonable assumption that the succession effect is weakest and the successor effect absent altogether on non-successor farms, with implications for the pattern of farm business development.

Figure 3 supports this proposition indirectly by showing that farms on which succession has been ruled out are more likely than any other group to be disengaging on even withdrawing from agriculture. Withdrawal in particular is a feature of businesses being managed by elderly farmers who, lacking successors or having ruled out succession, are working fewer hours and making enterprise changes to reduce their workload. O n such farms, land may be let under short-term leases or even sold off altogether. Thus, of the 23 per cent of non-successor farmers aged 65 and over in the sample, 39 per cent have closed down or significantly reduced the scale of farm enterprises and 27 per cent are farming the land less intensively than 15 years ago, though, interestingly, less than 45 per cent intend ever to retire completely from agriculture. O n the other hand, these are the farmers most likely to consider getting out of farming should market conditions deteriorate significantly (46 per cent compared to just 8 per cent of elderly farmers with a successor present). In the following examples


there is clear evidence that the farm is becoming a retirement holding, albeit one that is being maintained as a capital asset which will eventually be trans- ferred to a non-succeeding heir:

Mr I had been working on his family and later his own farm for over 40 years and in 1976 had a business covering some 250 ha. However, a series of events led him into financial difficulties. A partnership collapsed, reducing the farm area by 80 ha; disease problems lead to the closure of the d a q unit and an egg enterprise developed to replace this failed and was closed down in 1989. Also during this period, it became clear that neither of the farmer’s children (son and daughter) would succeed him. Then in 1989, 41 ha of rented land were given up and the remaining land was put into set aside. Now the farmer is unsure what to do. He has been able to semi-retire t h a n k s to the set aside scheme and has to choose whether to reenter the new set aside scheme or sell his holding. It is possible that his son would wish to retain ownership of the land while continuing his career outside farming. What is clear is that the farmer will divide his farm or the capital gained from its sale equally between his children. (Elderly farmer facing uncertain succession)

In the case of Mr J, none of his three children is interested in taking up the reins of managerial control. Inheriting the farm late in life at the age of 57, he had not previously been working on the farm but had worked in other family related businesses. Since inheriting the business he has sold one farm plus further parcels on three separate occasions. With no-one to take over the business, it is clear that the farmer’s main concern over recent years has been to minimize the labour needs of the farm while maintaining its asset value. Very little land improvement has been carried out for several years and indeed the farmer is looking seriously into the scope for putting land into the Farm Woodland Scheme. (Elderly farmer lacking a successor)

Of course, the other side of this coin is a short-circuiting of the process of farm development when the land is eventually sold or passes into the hands of an heir. It was not possible in the present survey to trace this chain of events, though there were examples of new entrants who had taken over their present farms from retiring farmers. In the following case the farm had been run down in the previous 10 years and the transfer of ownership was the signal for a significant restructuring of the farm and land use and the start of another cycle of farming change:

Mr K came to his present farm in 1969, having previously worked in the petrol industry. The farm was sold to him by an elderly farmer who had allowed the farm to decline in his later years. O n purchasing the farm, Mr K began a programme of land improvement, draining some 40 ha, erecting new buildings, concreting the yard and increasing the use of fertilizer and other agro-chemicals with the aim of, ‘putting the holding in good order.’ During this period the farm, which was previously livestock based, was radically restructured as an intensive pig enterprise, was developed and land converted into arable production. (New entrant)

Unbroken threads? Succession and its efects on family f a r m s 303

Discussion and conclusions

Bennett (1982, p. 299) has argued that farm families, like most humanenterprises, tend to have cyclical histories, “with a start, a middle and then perhaps another start. The important question is how this historical sequence differs from one enterprise to another.” In this paper we have demonstrated that planning for succession and carrying it through has an often profound impact on the management histories of farmers, triggering new phases of development or bringing others to a close on some farms and accounting for very long periods of appar- ently unbroken expansion elsewhere. Succession provides both an incentive to act and the resources, labour and skills necessary to carry plans through. Its influence may shape a farm’s business trajectory, beginning from the moment a successor is identified and plans are made to expand the income earning potential of the farm. At the same time, many farmers who have embarked on expansion and restructuring programmes in the recent past are frequently found to have experienced a change in family circumstances brought about by succession. When succession fails or is ruled out the effect may be equally decisive, particularly in the farmer’s old age when the business may be run down to reduce workload and farming effort. If succession is ruled out at an early stage, this may profoundly affect the trajectory of farm business development such that, in retirement, the farmer faces a very different set of choices and opportunities compared to farms on which the succession effect has been operating.

The implication is that succession is an important ‘sorting process’ which is creating an ever more differentiated farming community. Much has been written about the progressive polarization of farming into a bi-modal structure of very large and very small farms resulting from the disappearance of medium sized farms (see for instance, Butte1 1983). Economic advantages conferred by size and the improved access to land and capital enjoyed by larger businesses, are usually invoked as factors in this seemingly inevitable process (though other commentators have cautioned against a too rigid interpretation of this process). The present analysis suggests, however, that the process of succession may also be important here. Because it is more likely to take place on economically advantaged farms, where it provides a further spur to expansion and restructuring, succession appears to be one of those positive feedback mechanisms which are progressively widening the gap between mainstream and marginalized family businesses. As Marsden et al. (1992) have observed, market mechanisms and family processes like succession, far from being ‘structurally contradictory,’ are mutually reinforcing, with a greater chance of family continuity on the most economically successful medium or large farms. The succession, successor and retirement effects outlined above suggest that the explanation for this virtuous circle is as much behavioural and motivational as economic.

Not that succession takes place in a policy vacuum. Government policy for agriculture has shaped the wider economic context in which farmers plan for and carry through succession and there has been a complex interaction between


this and the succession strategies actually pursued. As Gasson and Errington (1994) point out, farm businesses often develop their own cycles of growth and decay set off initially by life cycle factors - but these are always strongly influenced by events in the wider economy and by pressures bearing down on family businesses from outside. The survival of family farms is due in no small measure to the flexibility of family forms and patterns of bthaviour. According to Symes (1990, p. 289), patterns of succession and inheritace inrehe UK have Oresponded, at least in part, to the demands of a technically sophisticated, economically rational system of production nurtured by the EU’s Common Agricultural Policy.” Specifically, the rising land values and rents which were identified at the beginning of this paper as one of the main barriers to establishing successors in farming, and which have led to a more widespread incorpora- tion of successors(s) within existing businesses, are themselves Iargely due to the high price regime created by the CAP. In this sense, policy has affected the nature, rate and timing of succession on farms, bringing it foTwatd in the life cycles of the most successful farms even as it puts it back or eliminates it en- tirely from the life cycles of family run businesses on the economic margin. For the future, reform of the CAP and working out of longer term structural forces in capitalist agriculture will see the emergence of new succession strategies and patterns as farmers seek to ensure family continuity in a pt-producti- vist policy environment.

A likely scenario supported by the survey evidence is one which sees a growing division between the most dynamic and economically successW businesses, for whom family continuity is assured and where the early incorpora- tion of offspring becomes the norm, and the more marginalized businesses on which succession is either delayed, achieved in a part-time way 6r does not take place at all. Certainly the trend towards early successim on larger, more estab- lished farms looks set to continue, bringing with it the positive feedback effects observed above. For the rest, a wider variety of strategies to ensure family continuity will be observed, succession itself becoming an increasingly complicated, negotiated and even ambiguous process for very many family businesses - with all that implies for farm business growth and development. A trend which the survey evidence suggests is most likely to take place on smaller farms is towards delaying succession until the moment of inheritance on the farmer’s death. Rather than succeed to the farm in the usual way, increasing numbers of sons and daughters of farmers will look to employment off the farm (and even outside farming altogether), leaving the farm to be managed by the farmer into retirement. The eventual outcome in such situations is unclear, though the propensity to run down farms where the successor is not physically present must place a question mark against the long run viability of such businesses. Less drastically, a successor may take up part-time employment off the farm, continuing to supply hidher labour and supplementing farm household income until the farmer is ready to retire or dies. It may be that this pattern of part-time succession becomes an important pathway into full-time farming

Unbroken threads? Succession and its effects on family firms 305

for the next generation of farmers; it is a process which deserves further research. Finally, the survey points to the emergence of greater numbers of retirement holdings within the small farming community in the years ahead. Held and maintained by retirees and elderly farmers on a low input basis to finance their retirement or as assets for transmission to non-succeeding heirs, these are farms which may lack first degree successors. They are also increasingly the result of a conscious decisions made by occupiers of farms with poor long term economic prospects to rule out succession at a relatively early stage in the family life cycle, even on a part-time basis. Leading eventually to the sale or reletting of the holding on the current farmer’s death, their existence is a prediction of future structural change. In the patterns of succession today can be read the shape of farming futures to come.

Note

1. The landscape type classification is derived by combining separate land classes into three distinct groups (see Barr et al. 1993). Briefly, arable landscapes are dominated by arable crops and intensive grass and are concentrated largely in the South, East Anglia and East Midlands. Pastoral landscapes are characterized by large areas of pasture, small fields, hedgerows and small woods, and are typical of western Britain. In contrast, upland landscapes, found particularly in north and west Britain, are dominated by a mixture of low intensity &ry and forestry. This landscape contains extensive tracts of semi-natural vegetation.

Acknowledgements

This study was supported by the Economic and Social Research Council (Project Grant No. ROO0 233785) and the Department of the Environment Wildlife and Countryside Directorate. We are grateful for the comments of an anonymous referee.

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