Friday, 24 November 2017
Strong year for UK forestry with 40% increase in trading
UK forestry remains a booming industry with £111million of forestry being traded in the past year, 40% more than in 2016. The finding comes from the 2017 UK Forest Market Report by Tilhill Forestry and John Clegg & Co that was launched on Wednesday 22 November.
The report is based on sales of commercial forest properties between 1 October 2016 and 30 September 2017. It revealed that a total of 17,272 hectares were traded; 78% of these were in Scotland, 18% in England and 4% in Wales.
Within the time period, the market returned to its normal growth after a quiet 2016 with 87 forest properties sold – compared to 67 the previous year – for a total of£111.04 million, up £31.8 million from 2016 and against a five-year average of £104 million a year.
The report confirms the MSCI IPD Index findings that the industry is in good shape with average annualised returns of 10.7%. It continues to outperform most other asset classes – despite a fall from the 10-year annualised rate of 17.4% - and it also benefits from strong political support due to the industry’s economic contribution, green credentials, carbon sequestration and biodiversity.
Peter Whitfield, Tilhill Forestry’s Business Development Director said: “We have been encouraged to see a steady flow of new investors into the market attracted by the good returns, the potential for tax planning and/or long-term capital growth, and frequently just a genuine enthusiasm for getting involved in forestry.”
Fenning Welstead, Partner in John Clegg & Co’s Edinburgh office added:“Large scale commercial plantations have been in strong demand but the supply of such properties is decreasing. With some notable exceptions, none have been established for almost thirty years. Many of the larger private plantations are now in the ownership of collective funds and portfolios. Whether they will come to the open market again is debatable and these funds continue to seek further acquisitions. There have been some very strong sales this year as a result.”
The report highlights the demand for farmland with potential for new planting schemes, and that the future fortunes of farming “in the changing world of Brexit and generational succession will have a significant impact on forestry.”
Mr Welstead said: “There is a move towards exciting new afforestation programmes with positive support from grants and political will. Potentially, significant opportunity for afforestation may result either from existing farmland owners planting parts of their land or from changed ownership to forestry investors.”
Summarising the report, Mr Welstead added: “The forestry industry is in good shape but much needs to be done to safeguard it for the future. We need to engage in afforestation and we need to promote an understanding of the need to plant trees.”
View the report here.