The Rural Update: The government knocks farmers again
Your weekly dose of news, views and insight from Knight Frank on the world of farming, food and landownership
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Viewpoint
You have to give it to Defra’s PR team; it took some chutzpah to spin last week’s no-notice closure of the current round of the Sustainable Farming Incentive as a success story. Sure, plenty of farmers had already signed up, but many more were still pulling their applications together and have now missed out on a valuable source of extra revenue. Not only will this hit the already battered confidence of an agricultural sector still reeling from the changes to Inheritance Tax even further, but it also won’t be good for nature if the funding cut means some farmers and landowners understandably row back on their environmental ambitions. The big question now: is there any more bad news left to deliver? With Chancellor Rachel Reeves’ Spring Statement due out on 26 March and the government’s spending review in full swing, it will be a nervous wait. The moral of the story: don’t delay in applying for grant funding when it’s available. It might not be around for long.
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Commodity markets
Oil prices back up
Just as pump prices had started to fall, crude oil prices regained some of their losses in early trading this week following a wave of US airstrikes on Yemen’s Houthi rebels. Traders are worried that the bombings, launched in response to the Iran-backed rebels’ attacks on cargo ships passing through the Red Sea, will trigger more geo-political tensions in the Middle East. China also buoyed markets by announcing a plan to boost domestic consumption alongside more positive economic data.
Wheat sterling uptick
UK feed wheat prices nudged up slightly last week as a drop in the value of sterling made home-grown supplies more competitive. Overall, though, market sentiment remained bearish with the USDA’s March World Agriculture Supply and Demand Estimates (WASDE) bringing little immediate good news for arable farmers. Looking further forward, £191/tonne is available for November 2025 deliveries, with £201/tonne on offer for anybody prepared to wait until May next year.
The headlines
SFI door slammed shut
Defra stunned the farming industry last Tuesday by announcing that it was closing the current round of the Sustainable Farming Incentive with immediate effect.
Farming Minister Daniel Zeichner said the popularity of the scheme – 37,000 agreements are now live – and the fact that the previous Conservative administration had not placed a cap on applications despite finite funding – meant the government had been left with little choice.
“Now is the right time for a reset: supporting farmers, delivering for nature and targeting public funds fairly and effectively towards our priorities for food, farming and nature.”
Eligible applications that have already been submitted will be taken forward, but it still leaves many businesses that were planning to apply at risk of a cashflow crisis.
James Farrell, our Head of Rural Consultancy, comments: “Steve Reed claims he is listening, but who is he listening to? The 'free-for-all' that was the SFI application process has ended in the inevitable disappointment that comes with the mismanagement of a scheme.
"Of course, SFI was going to run out of funding, but the guillotine that has been applied has created huge frustration, worry and anger. In all likelihood, the people who need this funding the most have been excluded!
"The question, then, is what next? Is this the precursor to more cuts? From the government, there is a need for clarity: what is expected of farmers, and what is the plan for food and farming? For farmers, the question is how to build resilience in farming businesses.
"More of the same will not work. In this challenging world, rural businesses must focus on being relevant, sustainable and resilient."
Simon Britton, Head of Agri-Consultancy at Knight Frank, added: “The immediate priority for affected businesses is to review cash flow and adjust plans accordingly. Identifying cost efficiencies will be a priority, and exploring alternative options, such as the Countryside Stewardship Higher-tier scheme, may be necessary.”
Plans for a new SFI scheme will be released later this year after the government’s spending review. However, as reported in The Guardian, ministers are already hinting that the most profitable farming businesses could be excluded.
Planning and Infrastructure Bill published
The other big news last week was the eagerly awaited launch of the government’s Planning and Infrastructure Bill (PIB). The bill, which aims to speed up the delivery of new homes and renewable energy infrastructure, features a number of measures that are relevant to rural property owners.
These include a “first-ready, first-connected” system for renewable energy schemes, a streamlined planning process for new housing developments that should see fewer applications turned down by committees, and the establishment of a Nature Restoration Fund and Environmental Development Plans. The government claims these will be a “win-win” for developers and nature.
However, the most controversial element was a change to compulsory purchase (CPO) powers. In certain CPO cases, purchasing authorities will no longer have to include the “hope value” of land in any compensation payments.
Although it is not expected that this will apply in the majority of cases involving farmland, Tim Broomhead of Knight Frank’s Compulsory Purchase team says it sets a dangerous precedent and could be extremely detrimental for landowners in certain situations.
Natural England will also have CPO powers to acquire land needed to deliver Environmental Development Plans, which the government says, when combined with the new Nature Restoration Fund, will make it easier for developers to meet their nature-restoration obligations and fund larger-scale, more strategic environmental interventions.
News in brief
Employment Rights Bill passed
The government’s Employment Rights Bill, which covers 28 different areas of employment law, was approved by MPs last week. There are a number of issues, such as changes to statutory sickness rights, the extension of protections for zero-hour contracts to agency workers, and new rules around dismissals, that rural employers will need to be aware of. The biggest issue, however, could be the capacity of small businesses to digest the impact of so many changes if they are all applied at the same time.
Farmer confidence slumps
The results of the NFU’s latest Farmer Confidence Survey reveal that pessimism levels of farmers in England and Wales have hit an all-time high. The survey, which was compiled before the SFI shutdown discussed above, rates producer confidence on a scale from -100 to +100. The short-term (12-month) confidence score has collapsed 10 points since the last survey to -35, but the outlook for the next three years at -38 is even gloomier.
Crown estate eco potential unlocked
The Crown Estate Act was amended last week to give the organisation, which owns 185,000 acres in England and Wales plus the surrounding seabed, new borrowing and investment powers that the government says will help it support the country’s energy transition and nature restoration goals. The amendments, which kick in on 11 May, could unlock £1.5 billion of inward investment over the next 15 years.
US rolls back environmental protections
Meanwhile, in the US, Lee Zeldin, the new boss of the country’s Environmental Protection Agency, drastically reframed the organisation’s remit last week when he announced that its mission was to “lower the cost of buying a car, heating a home and running a business”. Mr Zeldin also said he was scrapping many of the nation’s environmental regulations, including limits on vehicle emissions, protections for wetlands, and the legal basis that allows the agency to regulate greenhouse gases.
Climate change to hammer global GDP
Mr Zeldin’s announcement coincided with the release of a gloomy new report from Boston Consulting Group and the University of Cambridge that claims the world’s cumulative economic output could drop by as much as 34% if the average global temperature is allowed to climb 3% by 2100.
Environmentalists protest PIB
It’s not just farmers and landowners who are concerned about aspects of last week’s Planning and Infrastructure Bill (see story above). Environmental groups, such as the Community Planning Alliance, claim that the bill does not do enough to encourage developers to protect local habitats. They are also worried about the bill’s wording, which says the fees set by Natural England for replacing lost habitats must not hinder development viability.
BNG statutory credit spending
Natural England sold £247,416 of biodiversity net gain (BNG) statutory credits to developers in the 12 months to February 2025. It says none of the cash, which is ringfenced for nature improvement, has yet been spent on habitat creation or enhancement due to the lack of scale. It notes, however, that administering the sale of the credits will cost around £300,000 for the current financial year.
Community renewable funding
Thrive Renewables, previously Triodos Renewables, has partnered with social impact investor Better Society Capital to create a £40 million fund to help finance community-based renewable energy schemes. Projects should be at least 1MW and have secured planning permission. Please contact our renewables team for advice on any projects.
Rural population data released
The number of people living in the English countryside has nudged up slightly, according to the latest data from the Office for National Statistics. After crunching numbers from the 2021 Census, the ONS has calculated that 9.5 million live in areas classified as “rural”, up from 9.3 million at the time of the 2011 Census. However, overall growth means the countryside’s share of England’s population has slipped from 17.6% to 16.9% over the same period.
Global vineyard prices
Wine consumption is falling, but how is that affecting the value of vineyards around the world? The newly launched 2025 edition of The Wealth Report features a global round-up including the thoughts of Will Banham, a member of our specialist Viticulture team, on the UK’s vineyard market. Read the article and download a copy of the report.
Property of the week
New Zealand upland gem
Te Rangi Station, near Hawke’s Bay on New Zealand’s North Island, has just been launched by Knight Frank’s local partner Bayleys. The 2,343-acre property is set up for hunting and breeding deer, as well as raising beef and sheep. There are also tourism opportunities. The property includes three houses, shearer accommodation and ample deer and livestock buildings and handling yards. The deadline for tenders is 17 April. No guide price has been published but please contact Georgie Veale for more information.
Discover more of the farms and estates on the market with Knight Frank
Property markets
Development land Q4 2024 – Housing delivery down
Only 2% of the 50 housebuilders recently surveyed by Knight Frank believe that the sector will deliver the 300,000 new homes that the government is targeting for 2025. The gloomy prognosis is contained in the latest instalment of our Residential Development Land Index report, compiled by researcher Anna Ward, which reveals that the price of green and brownfield development land remained flat in the final quarter of the year, despite Labour’s ambitious housebuilding targets and planning reforms. Download the full report for more insight and data.
Country houses Q4 2024 – Market weakens
The price of houses in rural areas slipped by 0.3% in the final quarter of 2024, according to the latest results from the Knight Frank Prime Country House Index. Overall, values fell by 0.9% during the year. Demand for homes in the countryside has continued to fall since the Covid-19 pandemic, points out Head of UK Residential Research Tom Bill. Exchanges in 2024 were down 20% on the five-year average, he says. However, prices are expected to rebound by almost 18% over the next five years, Tom predicts.
Farmland Q4 2024 – Prices resilient
The farmland market edged up slightly during 2024, according to the latest results from the Knight Frank Farmland Index, which tracks the value of bare agricultural land in England and Wales. Average values started the year at £9,152/acre and, heading into 2025, stood at £9,164/acre, a slight rise of 0.1%. Given the challenges that the farming industry has faced over the past 12 months, this shows the inherent resilience of agricultural land as a multi-functional asset class. Prices, however, did dip in Q4 after Inheritance Tax reforms on farmland were announced as part of the Autumn Budget. For more insight and data please download the full report.