Forestry is a reliable investment option that offers strong and stable financial returns over the long-term - despite short-term challenges.
At an event at the Houses of Parliament, organised by Brodies LLP and the forestry management company Scottish Woodlands Ltd, a range of experts outlined the drivers that make forestry such an attractive option.
Graeme Leith, a rural partner with Brodies LLP, told the audience: “Well-managed forestry in the right place is considered a very safe asset by a broad range of investors."
David Robertson, investment and business development director with Scottish Woodlands Ltd, said: “Five-year forestry returns are sitting around 9% per annum, and while gold is performing better at around 15%, other asset classes like commercial property are down at around 2 or 3%. Forestry is very stable during times of economic uncertainty and, like gold, acts as a defensive asset in difficult times."
Emily Pike, a partner and tax expert at Brodies LLP, said forestry was still "very much seen as a stable asset" by overseas investors, although it needed careful planning to reflect Inheritance Tax (IHT) changes.
She outlined the recent changes to IHT, which come into force on 6 April and will affect all rural businesses. She said the changes to the thresholds at which IHT is paid, increasing costs significantly, had led to much more intentional tax and succession planning, often involving a wider range of ownership structures.
Mr Robertson spoke about the need for a "patient, responsible" approach to forestry investment and added: “Forestry has always been a long-term business and isn’t particularly suited to quarterly reporting cycles. But long-term demand for timber and the policy drivers for woodland creation make forestry a strong and attractive investment option. In many ways, it has never been stronger."
Paul Brannen, a recently-appointed forestry commissioner, timber advocate and author of Timber! How wood can help save the world from climate breakdown, said there were very strong reasons why the UK would need more timber, which would make forestry investment even more attractive in future.
“Opportunities to invest in forestry are directly linked to the growing need for timber in construction, and for biomass,” he said. Mr Brannen and other speakers said forestry ticked multiple policy boxes - tackling climate change, providing material for sustainable housebuilding, reducing flood risks, helping address biodiversity loss, and providing tens of thousands of jobs while driving rural economic growth.
Stuart Goodall, chief executive of the forestry and wood trade body Confor, said there is a growing understanding of the need for more UK-grown timber to enhance future timber security as demand continues to grow.
He said political support for productive forestry and timber use across the UK was “positive and encouraging” - and praised Mary Creagh, the UK Forestry Minister, for proactive engagement with the investor community.
Graeme Leith touched on the thorny issue of judicial review challenges to large forestry sites - but said he felt this could be positive because it better equipped the industry to avoid issues on other sites in the future.
David Robertson suggested that “certain actors” were using the judicial review process to thwart “perfectly good commercial planting schemes” - often based on their inherent dislike of productive forestry, and frequently deploying misinformation.
He said protestors were focused on the process itself, which sometimes revealed inconsistencies. However, like Mr Leith, he thought this presented a positive opportunity for the industry to ensure its processes were robust.
He said: “Investors can handle complexity. What they don’t want is unpredictability”
