UK rural property: A sustainable future for all farms
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
11 minutes to read
Opinion
It’s always important to look beyond the headlines and the latest farm income figures from Defra are a good case in point. Although average farm incomes did increase across England last year, some sectors like pigs were rising from a very low base, while both lowland and upland livestock farming businesses saw their incomes decline significantly. Given that beef and sheep farmers are custodians of some of the country’s most treasured landscapes, this is something that policymakers need to be well aware of, especially as upland farmers are going to be hardest hit by the removal of the Basic Payment Scheme. Profitable farmers are more likely to be in a position to help the government to hit its ambition environmental targets than those struggling just to survive. It’s hard to go green if you’re in the red AS
Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update direct to your email here
Andrew Shirley, Head of Rural Research; Mark Topliff, Rural Research Associate
In this week's update:
• Commodity markets – Oil down, sugar talks back
• Food – Anti meat and dairy backlash
• Pollution – Fishing club bests Defra
• Tenant farming – Calls for evidence now open
• Farm incomes – Mixed picture emerges
• Autumn Statement – Rural implications
• Natural capital – Tax treatment details delayed
• Grants – Slurry infrastructure fund opens
• Land at Simonsbath – Rare piece of Exmoor for sale
• Development land – Prices still falling
• Country houses – Prices drop
• Farmland prices – Market at peak?
• The Rural Report – Watch the videos
Oil down, sugar talks back
Filling up the tank felt slightly less painful last week as crude oil prices fell sharply. The slide followed an announcement from Opec+ that it was postponing a planned meeting until this Thursday. According to traders this suggests the oil cartel’s members are struggling to agree on further supply cuts with smaller members apparently less keen to trim their output, despite pressure from Saudi Arabia. Brent crude fell nearly 5% at one point before rebounding to US$78.62 a barrel. Meanwhile, British Sugar has agreed to reopen talks with the NFU regarding its sugar beet contract price AS
Talking points
Food – Anti meat and dairy backlash
Bristol University has shown that not all students live up to their woke reputation when it comes to meat and dairy consumption habits. Last week, the university’s students voted against a motion that would have banned meat and dairy at their student union outlets and required all vending machines to be vegan. The motion was opposed by 57% of the council, while 11% abstained, and 32% supported it.
In contrast, NatWest has come under criticism for apparently suggesting that people should cut their red meat intake. The financial firm’s banking app can provide a monthly carbon footprint based on your spending habits and then give suggestions to reduce them. But the advice given for meat and dairy is to slash these. The NFU has raised concerns saying that it “oversimplified” the message. Following meetings between the NFU and NatWest, the bank has promised to review its app content and work with its agriculture team to get across a more balanced message MT
Pollution – Fishing club bests Defra
In a victory for anglers, the Pickering Fishery Association has secured a ruling from the High Court that the government and Environment Agency failed in their duty to restore and protect waterways from pollution. In association with campaign group Fish Legal, the association took the government to judicial review over its river basin management plan for the Costa Beck river in the Humber district, which had a reputation as one of the best fly fishing spots in the UK until a few years ago. They argued that the Environment Agency, under the Water Framework Directive regulations, had failed to follow through with its proposed action against polluters, including Yorkshire Water, whose treatment works at Pickering discharged into the watercourse hundreds of times a year. Other fishing associations may now follow suit forcing the government to overhaul its policies. A Defra spokesperson said: “We are carefully considering the outcome of this judgment and next steps.” AS
Tenant farming – Calls for evidence now open
Defra has opened its call for evidence on good practice in the tenant farming sector. As I reported last week, the call is considering how dispute mechanisms can be improved and the role of a potential Tenant Farming Commissioner. The call will be open until 8 February 2024. Alastair Paul of Knight Frank’s Rural Consultancy team says: “The industry is entering a huge period of change which affects those that own and rent land. Effective communication is the backbone of how the industry will navigate through this period, and I am pleased that the government is following up with real commitment. Land agents acting for those who rent and those who own should use this opportunity to think very carefully about their behaviour and actions. I certainly have, and whilst I am happy to pursue and take a stand for fair arrangements, I am much more mindful of the impact my conduct has on that person and their family. Agents must not hide behind their client’s instructions (easier said than done) but stand up for what they believe is right. I am on a new journey 20 years into my career – I welcome others to join me" MT
Farm incomes – Mixed picture emerges
The latest farm income figures published by Defra highlight the challenges faced by different parts of the English countryside. Overall, farm incomes adjusted for inflation rose by 5% to £96,100 in the 12 months to February 2023. But as the chart below shows some livestock farmers have seen their incomes fall sharply and milk prices are already falling again.
Source: Defra. Figures adjusted for inflation
New figures from the NFU suggest the situation is likely to get worse for upland farms as the post-Brexit cuts to direct payments ramp up. According to the farming union, business will be 37% worse off in terms of the support payments they receive under the government’s new Sustainable Farming Incentive and Countryside Stewardship options AS
Need to Know
Autumn Statement – Rural implications
Last week’s Autumn Statement contained a few pre-election headline-grabbers that may benefit some farm and estate employees, but nothing to really get the champagne corks popping for rural businesses aside from more consultations on planning and energy infrastructure.
Minimum wage - From 1 April 2024, the National Living Wage (NLW) will increase by 9.8% to £11.44 an hour for eligible workers across the UK aged 21 and over. Young people and apprentices on the National Minimum Wage (NMW) will also see a boost to their wages.
National Insurance – The main rate of Class 1 employee National Insurance contributions (NICS) will be cut from 12% to 10%. This will take effect from 6 January, and the Treasury estimates it will provide a tax cut for 27 million people. The government will also cut the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024.
Investment - Full expensing will become permanent, meaning businesses can write off the full cost of qualifying plant and machinery in the year of investment. This means companies are rewarded with up to 25p off their tax bill for every £1 that they invest.
Nutrient mitigation – An extra £110 million has been earmarked for the Local Nutrient Mitigation Fund. This funding is intended to support local planning authorities affected by nutrient neutrality rules to deliver local nutrient offsetting schemes. The Department for Levelling Up, Housing and communities reckons this could help unlock 40,000 new homes over the next five years.
Energy – The Government confirmed that it will reform the grid connection process, aiming to reduce overall connection delays from five years to no more than six months. A new Action Plan will also be published to ensure all new grid infrastructure is built within seven years.
Planning – There will be a consultations on amending the National Planning Policy Framework (NPPF) to ensure the rollout of EV charge points is prioritised, and on introducing new permitted development rights to end the blanket restriction on heat pumps one metre from a property boundary in England. New ‘premium planning services’ will also be introduced across England with guaranteed accelerated decision dates for major applications and fee refunds wherever these are not met.
Natural capital – Tax treatment details delayed
In addition to the measures detailed above, the Autumn Statement small print confirmed that HMRC’s eagerly awaited response to its consultation on the taxation of environmental land management and ecosystem service markets will now be delayed until Spring 2024. The consultation, which ended last June, asked for views and evidence on the tax treatment of the production and sale of ecosystem service units. It also consulted on the scope of agricultural property relief from inheritance tax. “The aim is to explore the extent to which the current scope of agricultural property relief may represent a barrier to uptake or involvement in nature-based markets such as Biodiversity Net Gain.” This is an important piece of the puzzle for many landowners and managers who are deferring decisions until they know the tax implications of being locked into long-term environmental markets MT
Grants – Slurry infrastructure fund opens
The Slurry Infrastructure grant scheme is now open for applications, with a pot of £75 million up for grabs. As I reported last month, grants ranging from £25,000 to £250,000 are available to enhance slurry storage beyond legal requirements, promoting organic nutrient use and pollution reduction. The second round introduces changes that include increased storage options for pig farms, support for slurry separators, covering existing stores with impermeable covers, introducing in-situ cast concrete stores, and providing landlord underwriting for grant agreements. If you applied for round one and want to take advantage of these changes, the Rural Payments Agency (RPA) will offer a limited opportunity to update your application. Our grants guru, Henry Clemons, says: “Where there’s muck, there’s money. This is a great fund for English farmers looking to improve their slurry storage facilities” MT
On the market
Land at Simonsbath – Rare piece of Exmoor for sale
Our Farms & Estates and Bristol team are selling approximately 390 acres of pasture, improvable grazing land and moorland in Exmoor National Park near Simonsbath, Somerset. The land is in a private location, and offers opportunities for existing traditional farming as well as for natural capital and nature recovery. The guide price is £1.77 million. Contact Will Matthews or John Williams for further information MT
Our Latest Property Research
Development land – Prices still falling
The latest findings from our Residential Development Land Index show values are continuing to fall. “UK greenfield and urban brownfield values fell on average by 2.4% and 2% respectively in Q3 2023. In prime central London, land prices were flat during the quarter,” writes my colleague Anna Ward. “Average urban brownfield land values across England have now fallen by 20% since the most recent peak of the market in the first quarter of 2022 up to Q3 this year, with greenfield values down 17% during this period. But this quarter we have seen price falls start to moderate in nearly all areas,” adds Anna AS
Country houses – prices drop
The value of a home in the countryside is falling at the fastest rate since the global financial crisis, according to the latest instalment of the Knight Frank Prime Country House Index compiled by my colleague Chris Druce. In Q3 2023 average prices dropped by just over 2% taking the 12-month slide to over 8%. Despite the slump, values are still 12% higher than they were in June 2020. Chris says there is a bit of stalemate in the market as sellers cling to last year’s prices, while purchasers are angling for big discounts. Read the full report AS
Farmland prices – Market at peak?
The latest edition of The Knight Frank Farmland Index has now been published. The average value of bare agricultural land rose by 1% in the third quarter of the year to just shy of £9,000/acre. Annual growth was 8%, which outperformed a number of other asset classes (see chart). Our research suggests values may remain flat into 2024. Read the full report for more insight and analysis AS
The Rural Report – Watch the videos!
You've read the book, now watch the videos! To complement the thought-provoking articles contained within this year's edition of The Rural Report our whizzy Marketing team has also created a series of videos featuring many of the report's contributors. Head to our very own YouTube channel to discover more about biodiversity net gain and regenerative farming; find out how we are helping Guy Ritchie's Ashcombe Estate on its diversification journey; and read about the travails of an entrepreneurial Zimbabwean searching for a farm for his family. Plus, lots more AS