British forests top of the tree for investors

British forestry is on the way up. After five hard years of recession, when the only buyers of woodlands came from overseas, home-grown purchasers are back.

The buyers' favourite area is the South-west, which is "ideal for conifers - wet, damp and warm", according to David Sillar, proprietor of Highfield Forestry, a sales agency based near Edinburgh. "We are still largely dealing with overseas buyers, but it is growing again in the UK," he said.

Woodlands on the market tend to be worth pounds 50,000-pounds 250,000, with one or two at over pounds 1m. Mr Sillar said there were around 10 nice woods for sale in the South-west, compared with none a year ago. But there is practically nothing for sale in Wales at the moment, after a glut just over a year ago.

The British forestry market has been driven by two things since the late Fifties; tax breaks, and more recently a massive Forestry Commission sell- off.

The tax inducements of woodlands have pulled them into an intimate relationship with the Lloyd's of London insurance market, which has traditionally been very highly taxed.

This relationship started in the Fifties but ran into two problems. As Chancellor, Nigel Lawson cut most of the tax loopholes for forestry in 1988. Then came the crisis at Lloyd's, due to archaic management practices and huge insurance claims.

However, Mr Sillar said, there has been no big sell-off by Names, partly because of the uniquely attractive nature of forestry as an investment - whatever you do your asset goes on growing.

There has, however, been a flood of selling by the Forestry Commission, totalling 20 per cent of its holdings, or 20,000 hectares of woodland. The market has been kept alive with foreign buyers. And now, Mr Sillar said, British purchasers are beginning to reappear.