A crop of surprises

By the final quarter of 2003 the commercial property market is still buoyant and the agricultural sector blossoming. However, in spite of record spending in pubs and bars, the leisure industry is facing a potential crisis.

Despite predictions of market saturation and falling rental incomes, residential buy-to-let properties remain an attractive prospect for small-time investors. But the influx of small-time property investors has led to a dearth of run-down properties.

Serious investors are being tempted into the commercial property market, which has consistently out-performed shares and bonds (and, therefore, pension provisions) in the past decade.

Findings in the Investment Property Databank in Q3 have showed commercial property growth of 195% during the past 10 years, compared to the FTSE share index of 97%. While those with pensions invested in equities have seen the value of stocks plummet 30% in recent years, commercial property has given an average annual return on investment of 9.5%.

It is now becoming more accessible for small investors to enter the commercial property fray through self-invested personal pensions. Often organised through insurers or independent financial advisers, the most popular way of entering the market is via a syndicate of about five investors with £50,000 each to contribute.

Most interesting for those wishing to use their investment portfolio to shore up their pension is that SIPPs retain the same tax breaks as a traditional personal pension. If the pension fund is invested in property, the rent accumulates tax free and when the property is sold it is exempt from capital gains tax.

A return to traditional values, perhaps as a backlash to GM crops, is benefiting UK farmers. There has been a huge upsurge in demand for locally produced UK food, with shops and restaurants being encouraged to increase stocks of local food. The perception is that locally grown food is inherently organic and somehow healthier than the mass supplies available from supermarkets, which means local produce can command premium prices.

In a poll of 37,000 people nationwide, the GM Nation Report concluded that 54% of people are unconditionally against GM crops. It highlighted an underlying lack of trust in the authorities making decisions about GM crops and called for a reliable independent authority to establish the facts.

Those remaining in farming have taken measures to protect their businesses, with a massive 42% of farms diversifying. Such schemes are proving highly successful, contributing as much income to farms as their core business.

Branching out

An increase in UK tourism is supporting farmers branching out into the hospitality industry. VisitBritain recently announced that the tourist industry has the potential to grow around 30% during the next seven years, from £76bn to £100bn. This should provide a welcome boost for the much-beleaguered sector.

Not everything in the garden is rosy - tired of the endless cycle of crisis many farmers want to leave. According to the Royal Institution of Chartered Surveyors, 44% of farms sold in the second quarter of 2003 went to non-farmers. This is not necessarily a bad thing as it gives farmers with unprofitable farms the opportunity to opt out of the industry, leading to an increase in profitability for remaining farm businesses.

Others, preferring to remain in the sector, may lease back some of the land from new landowners with other farmers, spreading their fixed costs to take advantage of better economies of scale.

Alcohol is causing concern, with UK women having the highest alcohol consumption levels in Europe, according to Datamonitor. This latest trend is apparently due to the pursuit of a Sex And the City-inspired lifestyle of cocktails and wine bars.

The UK spent a massive £17.5bn in the pub last year, with other leisure pursuits such as cinema, theatre and bingo trailing in at £7.2bn. This is helping offset concerns that the minimum wage legislation is set to hit hard on the leisure sector, with its young, transient workforce. This could soon change though, with the EC's health commissioner, David Byrne, leading a crusade against smoking in cafes, restaurants and bars.

Rising NHS costs

Binge drinking is increasing, killing up to 22,000 people each year, according to a government report released in September. It also costs the taxpayer approximately £20bn a year in terms of NHS and police funding. With concerns that our compensation culture is set to rage out of control, the insurance industry is gearing up for a raft of claims for obesity, smoking and drinking-related illnesses.

The consequent hike in premiums is hitting the leisure sector hard.

Growth in both the retail and leisure sectors indicates that the economic climate remains upbeat. The Consumer Association, however, is appealing to people to start saving again, as debt has reached an all-time high.

There is a growing concern that our buy now, pay later culture has created an unsustainable level of borrowing, both in terms of mortgage lending and debt on plastic. If interest rates rise, many people will struggle.