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UK farmers have seen it all. Volatile weather, supportive and unsupportive Governments, devastating world events – the stars are rarely aligned, and the sector is resilient to challenges.
We are however in the midst of a reset. With the answers our farmers find to today’s issues setting the course for UK agriculture for years to come – potentially permanently.
Those issues are well publicised. Government subsidies are all but gone. Farmers and landowners are being paid to do things that are good for nature and the environment. Opportunities are lucrative but require a pivot from farming. Farming requires more investment in technology. People are more expensive and challenging to employ. The tax system is moving away from the sector. The Government isn’t sure how self-sufficient we should be on food. The climate is changing. The world is in conflict and the fuel markets are in turmoil.
There’s a lot to work out, so it comes as no surprise that a common response amongst our clients has been to find other ways to use their assets. In many cases younger generations are getting involved in ways they wouldn’t have historically.
I am heartened by the optimism of some of our leading farmers – you can see our discussion with Ryan McCormack from Dennington Hall Farms here. And it’s Ryan’s optimism that’s inspired me to share with you some of the things our clients are looking at to tackle the challenges facing our industry right now.
The subsidy hole
Noone reading this will need reminding of the phase out of the Basic Payment Scheme (BPS). We work with clients who were in receipt of six figure sums before phase out and are budgeting to receive £600 this year.
It seems that the only way to get close to replacing this via Government funding is to deliver something in return.
Two clients of mine recognised particularly early the opportunity to re-think their farming model. By entering large parts of their farms, 40% in one case, into Countryside Stewardship schemes, they have moved their emphasis away from volatile combinable results toward a more stable model.
The Countryside Stewardship money doesn’t cover the old BPS, but our clients have been able to reduce their cost bases so their overall profit isn’t affected. The individuals behind these decisions are still wholeheartedly farmers, but their businesses now carry less risk and require less working capital.
So, what else can you do?
UK agriculture has been told, for years, that it needs to diversify to survive. But with the cost of living at record highs and a growing energy crisis, what type of diversification is actually likely to add to the bottom line?
Across our client base we see three typical diversifications:
- Re-purposing land for the long term.
- Farming in a different way.
- Diversified activities – ancillary or separate to farming.
Renewable energy options – be it managed in hand or under a lease – have been popular in recent years and recent global events have highlighted the need for greater energy security in the UK. The market seems to have slowed recently on solar but there are still opportunities out there.
Lots of our clients, particularly those located close to key towns, have land under option and promotion for housing and commercial development. It seems these opportunities remain even with house builders issuing profit warnings and gloomy outlooks.
Regenerative farming continues to grow in popularity, particularly at times of high nitrogen and fuel prices. Our clients that have been regeneratively farming for more than a couple of years are now telling us about the benefits they are seeing to their soil.
Some are working with companies who reduce the length of the chain between farmer and consumer – this surely has to play a role in increasing the amount of money that ends up in our farmers’ pockets.
Many farming businesses have explored completely different routes. We’ve all been to farming conferences and heard the story of the family farm turned farm shop/glamping site/wedding venue.
Across our clients these diversifications are feeling the pinch. Wage costs are at record highs and employee rights legislation makes managing staff challenging for small and medium businesses. These businesses are also vulnerable to reduced consumer demand, particularly during periods of high costs of living.
Resetting the tax system
For decades farms have been passed down generation to generation free of Inheritance Tax (IHT). The rationale was simple – farming is crucial to UK Plc but is a low margin industry, we need farms to survive and therefore they shouldn’t be crippled by IHT liabilities on death.
From 6 April 2026 that has changed. 100% IHT relief is capped and there is a realistic prospect of IHT being paid on farms passing down generations.
Landowners will plan their affairs to avoid this, but the mental shift will be permanent.
Almost all of our clients see themselves as custodians of their land, responsible for looking after it for the next generation. Pleasingly these younger generations are now joining conversations they wouldn’t have previously.
Their attitude towards the balance of their business is affected by these changes to the tax system; clients are telling us – if we are at risk of a significant tax liability we should be making as much money as possible from our assets.
The robot/human cycle
This is not unique to agriculture, albeit agriculture is already well advanced. The Agricultural Census suggests that numbers of hired agricultural workers fell by 36% between 1990 and 2018, and recent DEFRA data suggests this downward trend continues.
Technology has advanced at lightning speed. Every week something new and shiny is released. Anthropic are talking about AI ‘too dangerous to be released publicly’ and some industries are facing the real prospect of generative AI changing the role of humans.
This comes as wage costs increase and employment legislation becomes more challenging for employers to navigate.
The young people I speak to though are recognising the shift from traditional farming jobs and are seeing opportunity come out of this change.
The breadth of roles in the sector has expanded – barriers to entry are still high if you want to own a farm, but there are many more routes into the sector in technology and science than ever before.
The reset is under way
All of our clients’ plans are unique, but common themes are appearing.
Many are taking land out of production to make way for environmental schemes and diversified income streams. As a country we need a serious conversation about where our high quality food comes from, but that is a topic for another day.
The attitude of future owners is changing by the composition of their farm businesses and the way in which they come into it. The emotional sense of custodianship is changing.
Roles within agricultural are changing. Less people are required to work on a farm however increasing opportunities exist in industries which support agriculture.
The reset is not a single event but a series of decisions being made every day on farms across the UK. Our clients are making choices every day about where to focus, what to prioritise, and how to balance short-term pressures with long-term sustainability.
What is clear though is that standing still is not an option.
We’re here to help
Working with advisors who understand the challenges and opportunities facing not just your business, but the sector at large, is critical. Our team help farmers across the UK understand their options and make informed decisions for the future.
For a conversation about your rural or farming business, contact Jack or one of the Agriculture team by calling 0330 058 6559 or email hello@scruttonbland.co.uk.
If you would like to read and download the latest edition of our Agriculture newsletter, please click here.
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