The trend of uncertainty that has existed in the farmland market is playing out again. Preceding any period of disruption or regulatory change, the market sees considerably less land brought to market. The Foot-and-mouth disease outbreak and CAP reform in the early 2000s, and the Global Financial Crisis of the late 2000s, saw steep drops in farmland supply as landowners mostly stood back to assess the state of the market before acting on ownership plans. 2019 can now be added to the list as the year the Brexit-related uncertainty ruled the market to the same effect.

The close of the decade has to some degree put a full stop to part of this uncertainty and signaled the start of a new era of agriculture and land use in the UK. Major changes to the political landscape are aptly timed to provide the new framework and how the sector responds is likely to be driven by a few key factors:

Changes to agricultural policy

There is no doubt a transition from the Basic Payment Scheme (BPS) to a system of public money for public goods is going to hit the bottom line. It’s now a matter of understanding how this will be paid and to whom, with respect to landowners, land managers and supply chains. The Government has made it clear it intends to pay on environmental outcomes, which means there will need to be an action to receive the benefit. Adapting to such change will be necessary to ensure continued land use profitability.

New environmental income streams

Carbon offsetting, biodiversity net gain and rewilding are clear avenues for further development and consolidation of farm diversification strategies. Investment capital is primed to enter this sector and growing pressure on big business to account for indirect supply chain costs offers newfound value to the natural environment for considered solutions. How this transforms in the tenanted sector will be watched with interest, particularly with a third of UK farmland let and non-farming buyers accounting for an increasing portion of the market.  

Macro trade environment

The outcome of transition period trade negotiations will be essential to ensuring minimal disruption to farm business trading. The Government faces a precarious task of balancing food affordability and availability with new trade agreements that protect and benefit domestic farming interests.

Appetite for change

High performing and progressive farms are expected to remain profitable regardless of subsidy reform and it is possible many will be looking to expand should the right opportunities arise.  Characterised by a willingness to drive innovation and seek new opportunities for sustained business development, these businesses succeed in being proactive rather than reactive. 

The farming sector is exceptionally good at adapting to change. History would suggest technological innovation and disruption have resulted in radical gains across the food supply chain. Policy reform will set the parameters for the next chapter of the advance, but uncertainty in its detail has not yet passed. Rest assured the market is primed to enter this next phase and there are opportunities for those ready to commit.

Our recently published Spotlight: The Farmland Market highlights current trends in the market and sets out our take on the market going forward. It analyses factors which are likely to affect the market and signals the possibility of increased activity as clarity in the regulatory environment brings forward reviews of business strategy. It also highlights the global attractiveness of UK farmland as a tangible, diversified investment.

Further information

Contact Savills Rural