The importance of rural tourism
The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership
12 minutes to read
Opinion
Peak summer holiday season is upon us and having just taken my family vacation at a lovely rural spot in the West Country, I am all too aware how tourists can either be loathed or appreciated. Whatever your view, it is undeniable that tourists can bring an important economic boost to an area. And usually in areas of limited employment opportunities. Tourism and visitor spending can provide a vital alternative income and employment for farms and estates facing a squeeze on other enterprise margins. According to the CLA, it adds £14.56 billion to England and Wales' Gross Value Added (see story below). The association has also recently raised the importance of rural tourism and developed a strategy that it hopes could help rural businesses make the most of the opportunities. Making the most of the possibilities but in a considered and strategic way without flooding the market with accommodation and visitor attractions is crucial. Done right, and the investment that comes with it can also help enhance the local environment MT
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 – Welcome weather break
• Rural tourism – CLA devise strategy to boost sector
• Oil boiler ban – Could proposals change?
• Crop production – Morrisons trial to cover costs
• Food – Trade checks could be delayed again
• Farming – Study to track impact of nature-friendly practices
• Biodiversity credits – Knight Frank guide updated
• Hedgerows – RPA cutting derogation reminder
• Defra grants – More funding for farm innovation
• A world of opportunity – Farms for sale on four continents
• Country houses – Prices weaken
• Land values – Price growth slows
• The Rural Report – 23/24 edition is out now
Commodity markets
Welcome weather break
After a couple of weeks of unsettled weather across much of the country, the recent spell of sunshine and warmer temperatures has been much welcomed by growers. Harvest has progressed better in some parts of the country than others. Commentators are saying yields are generally around the five-year average. However, grain quality is unsurprisingly variable, and farmers and traders will keep a close eye on its potential impact on the markets.
Despite the weather woes, ex-farm spot prices for wheat and barley have softened slightly during the week, and oilseed values gained ground, influenced somewhat by currency exchange rate movements.
Fuel prices changed little on the week but have steadily increased in the past month due to crude oil prices rising following oil producers cutting production. Livestock producers have seen hay and straw prices gain several pounds per tonne lately due to the impact of this season's weather. Fertiliser prices, meanwhile, have fallen in recent months from the highs experienced last year. But the news that the CF Fertiliser UK plant at Billingham will permanently close will raise concerns that the country will be more exposed to global fertiliser supplies and prices MT
Talking points
Rural tourism – CLA devise strategy to boost sector
Rural tourism, which has faced a global pandemic and a cost of living crisis, could be a key driver for economic recovery, according to the Country Land and Business Association (CLA). It states that rural tourism accounts for 70-80% of all domestic UK tourism and adds £14.56 billion to England and Wales' Gross Value Added.
Particularly with the loss of Basic Payment Scheme payments in England, farms and estates are looking at how they can recoup a drop in incomes through diversification opportunities, and tourism may be an option.
The CLA says these opportunities may be derived through the Rural England Prosperity Fund and the reorganisation of the Destination Management Organisations (DMOs) in England. It is hoped the new DMO bodies will receive multi-year core funding and will be tasked with increasing private sector investment for tourism in their area. To reduce costs, the association proposes introducing a permanent VAT reduction to 12.5% for tourism accommodation and visitor attractions with a turnover of less than £1 million. Also, introduce a single business unit to simplify tax administration for diversified businesses. In addition, the CLA says that permitted development rights should also be extended for temporary uses of land MT
Oil boiler ban – Could proposals change?
Media reports say that the Prime Minister is under significant pressure to alter the plans to ban oil boilers in off-grid homes. Opponents explain the move is targeting up to 1.5 million households unfairly and liken it to a rural 'ULEZ'. The potential ban was planned to be implemented in 2026 but now faces having to be watered-down in order to be approved through the Energy Security Bill later this year. The ban was meant to be part of the government's aim to achieve net zero emissions targets by 2050. If the ban proceeds, rural households not connected to the gas grid would have to transition to alternative heating methods such as ground or air-source heat pumps.
Independent think tank, Localis, recommends a postponement of the ban until 2035 to allow the energy infrastructure more time to adapt. This adjustment would also align the oil boiler ban with the broader ban on fossil-fuel boilers scheduled for 2035. Another proposed alteration to the Bill would be subsidies for the use of hydrotreated vegetable oil (HVO), which could be used as a replacement following minor boiler adjustments. A government spokesman for the Department for Energy Security and Net Zero said: "We have consulted on new regulations to phase out boilers in homes and non-domestic buildings off the gas grid from 2026. We will confirm our plans when we publish our response to the consultation in due course" MT
Crop production – Morrisons trial to cover costs
The supermarket chain Morrisons has launched an interesting pilot scheme that will underwrite the full cost of growing potatoes and carrots. It will initially work with three potato farms and one carrot farm to cover costs such as field rent and fertiliser, providing £2 million to the trial. Morrisons says it will help growers "mitigate the cost and weather pressures that come from the peaks and troughs of the season."
In theory, a scheme like this should help with supply issues like those seen earlier this year, as it will provide confidence to growers. But it raises some interesting questions about how much the retailer will be involved in the production system's decision-making. I'm sure other retailers and growers will watch this trial with great interest, especially as it's off the back of significant hikes in input costs MT
Food – Trade checks could be delayed again
According to media reports, checks on animal and food products coming to the UK from the EU will be delayed for the fifth time. It seems that the government may be concerned that adding checks, planned for October, will fuel inflation at a time when Rishi Sunak is looking to see it halve. Up to now, EU exporters have not had to obtain the sort of paperwork that UK exporters have had to endure, mainly due to delays in building sanitary and phytosanitary (SPS) checking systems and securing land where physical random checks can be conducted.
This news has led the UK farming unions to raise their concerns that the lax checking of imports could leave farmers exposed to the introduction of animal and plant diseases. Meanwhile, UK exporters are at a competitive disadvantage of jumping through the hoops of a full border check to get produce into the EU. But UK food retailers, hospitality businesses and consumer representatives welcomed the possible delay to avoid major supply chain disruptions. It is reported in the media that the physical SPS checks could now be introduced in January MT
Farming – Study to track impact of nature-friendly practices
A groundbreaking initiative has kicked off in England, marking the most extensive investigation into ecosystems of its kind. The England Ecosystem Project will help understand the impact of nature-friendly farming practices at more than 6,000 locations – revisited every five years. The project is strategically designed to provide a comprehensive overview of the current status of farmland habitats and soil health while shedding light on regional and farming system variations.
With an ambitious agenda, the collected insights aim to substantiate the pivotal role of farmers in accomplishing the UK's ambitious 2050 net-zero target. Moreover, these findings will uncover untapped opportunities for bolstering environmental preservation efforts. Spearheaded by Fera Ltd in collaboration with 15 partner organizations, including the Wildlife Trusts and ADAS, the project will be funded by Defra and Natural England MT
Need to know
Biodiversity credits – Knight Frank guide updated
As Andrew reported in the last Rural Update, Defra released the indicative prices for biodiversity statutory credits at the end of July. These are the credits that land developers will be able to buy from November if they are unable to create all the biodiversity units they need as part of a building development project. James Shepherd, a Partner in Knight Frank's rural consultancy team, explains: "The announcement now provides developers with some certainty around the potential cost, should they not be able to secure on-site or off-site biodiversity units. But it may also mean we see some increase in unit prices where BNG land is scarce." A summary of what was announced about the statutory credits as well as the updated Biodiversity Net Gain guide can now be read on Knight Frank's website MT
Hedgerows – RPA cutting derogation reminder
The Rural Payments Agency (RPA) has reminded landowners and land managers of the need to obtain written permission to cut hedgerows in August. As many will know, the RPA states you must not cut or trim a hedge between 1 March and 31 August unless a derogation is sought. Derogations can be obtained for several reasons, including where a hedge obscures signage, public lamps, roads or rights of ways. For more information on how to obtain permission, see this RPA blog post.
It's also worth noting that the consultation of hedgerow protection is still open until 20 September 2023. Defra seeks views on the best way to maintain and improve existing protections. It also contains questions about buffer strips and cutting dates. Details about the consultation and how to make a submission can be found here MT
Defra grants – More funding for farm innovation
If you are interested in being involved in projects that research ideas around boosting productivity and sustainability, then you may want to apply for a share of £14 million - provided by Defra's Farming Innovation Programme. An allocation of £9.8 million will be available, by competition through the Small R&D Partnerships Projects fund to support projects further along in their current journey. The project's total cost must be between £1 million and £3 million and last up to 36 months. Previous projects funded in the first two rounds included monitoring dairy cow welfare without the use of collars and a digital crop pest detection system. The competition is open from 14 August until 25 October 2023.
The remaining share, £4.5 million, is available through the Feasibility Studies fund and is for projects in the early stage of their research journey. Again, it is a competitive fund which will provide between £200,000 and £500,000 per approved project. Successful past projects have been a project using the waste products from cherry juicing and a project looking at integrating on-farm renewable energy and waste management technologies. This competition will run from 18 September to 15 November 2023. Knight Frank's grant expert, Henry Clemons, can help with any of these and any other rural grant schemes MT
On the market
A world of opportunity – Farms for sale on four continents
If your agricultural property horizons extend beyond the shores of the UK, my colleagues around the world in the US, Australasia, Africa and Europe can help. The latest edition of The Rural Report includes a mouth-watering melange of international rural properties from natural capital opportunities in New Zealand to commercial arable farms in Zambia, to vineyards in Italy and France. Download the report to take a look AS
Our Latest Property Research
Country houses – Prices weaken
Country house prices came under pressure in the second quarter of the year, as the 'escape to the country' trend reset, and buyers re-calculated their budgets due to higher borrowing costs.
The average price of a property fell 2.6% in the second quarter, according to the Knight Frank Prime Country House Index (PCHI), compiled by my colleague Chris Druce. It was the largest quarterly fall since the global financial crisis in Q2 2008. It follows a decline of 0.5% in Q1.
It left country house prices down 4.2% since their peak in June 2022, although the average property is still worth 15% more than before the pandemic, which supported a surge in prices as people upgraded their homes and took advantage of a period of stamp duty savings.
Download the full report or contact Chris for more information AS
Farmland values – Price growth slows
According to the latest instalment of the Knight Frank Farmland Index, the average value of bare agricultural land in England and Wales rose during the second quarter of the year at the slowest rate since March 2021. Prices increased by just over 1% to £8,845/acre. Annual growth at 8% also slipped into single figures for the first time since the final three months of 2021.
Farmland, however, has outperformed the FTSE 100 equities index, gold, prime central London houses and mainstream house prices over three and 12-month periods. Over five years, only gold has seen stronger capital appreciation.
For more data and insight, please read the full report AS
The Rural Report – 23/24 edition is out now
The Rural Report 23/24 explores the opportunities for businesses, people and this year's theme 'Planet'. With insight and case studies on natural capital, biodiversity net gain and environmental legislation, it's a guide to the ever-changing rural landscape and how Knight Frank's rural teams are supporting their clients make the most of the opportunities on offer.
Whether you are a rural business owner or a commercial business wanting to make the most of your land, read a selection of articles online and download the full report here MT