06 Jul 2021
Blog: Farming and Brexit
Our Land & Estates Director Rosie Wilson talks about the impact of Brexit on farmers who use Peel L&P’s agricultural land and what we’re doing to support those affected.
Peel L&P’s Estates Team manages Peel’s rural Estate, extending to around 12,000 acres of land and water from Andover in the south of the country to Doncaster in the north. A large proportion of this land is for agricultural use, but includes everything from industrial units to reservoirs, domestic gardens and dog walking parks. We also seek to manage the reservations and restrictive covenants that are in place over land previously belonging to Peel L&P or the Bridgewater Estate, part of which is now home to RHS Garden Bridgewater.
We are currently in changing times for the agricultural industry. Brexit sees the phasing out of the Basic Payment Scheme (BPS), a European subsidy that has supported farmers according to the area of land farmed and we have approximately 60 tenant farmers that this will impact.
The replacement - English Environmental Land Management Scheme (ELMS) - works on the basis of public money for public goods. This scheme is still in the design stages and we’re currently involved in a trial to help better understand the support mechanisms available to our farmers going forward. We do know it will focus on supporting farmers to undertake works or change management practices like taking land out of production or planting trees for example. Whilst farmers will still be able to benefit from this, the subsidy will reimburse costs (with a small incentive) in contrast to the bottom-line support provided through BPS.
There will be a phased change from 2021 through to 2027. For the average English farmer this income equates to around 60% of their profit. This is the average, for some, BPS income exceeds profit. This is most common in the livestock sector. The removal of the subsidy income will force farmers to change practices, diversify or consider leaving the sector. To support those leaving the sector, changes to the scheme allow farmers to capitalise their current payment stream on retirement, or to decouple the payment from the land that they farm.
Farm profitability is obviously strongly linked to land rental and capital values. The removal of subsidies in New Zealand in the 1980s led to a drop of 50% in farmland values. We don’t anticipate such an extreme correction in the UK where there is less land per head of population and increased calls on land for development, green energy, leisure and other uses such as forestry, habitat creation and carbon capture. However, the forthcoming changes may increase land supply to the market as farmers choose to retire and impact upon the availability of lending to farming business, thus reducing their ability to compete in the market.
As many of our farms are in urban areas, they are well placed for farmers to diversify and we’re keen to work with farmers to support them to do this.
Image: Chat Moss in Salford where Peel L&P works with some of its tenant farmers.