According to Savills modelling, farmers’ applications to the lump sum exit scheme (LSES) cover around 105,000 hectares of land, which is 1.2 per cent of England’s agricultural land area. That’s equivalent to 20 per cent of Lincolnshire’s agricultural land area or 50 per cent of Hampshire’s. Expressed in these terms it does not sound like a lot, but to put it in context, it is 2.4 times the area of farmland that was offered for sale or let on the public market in England in 2021.

The LSES was launched to help those who wish to hand over their business to the next generation or leave the industry completely. Applications closed on 30 September 2022; it offered farmers a one-off opportunity to access a tax efficient lump sum payment of up to £100,000 in exchange for selling, letting or transferring their land to the next generation through gift or an agreed tenancy succession by 31 May 2024.

Effectively the 2023 ‘marketing season’ is available to complete the necessary transfers, although it does not follow that activity on the farmland sale and letting markets will increase to this extent because off-market transactions, transfers to family members and transfers since 17 May 2021 can all be used to meet the scheme’s eligibility conditions. There is also no obligation to carry through on applications, so some farmers may change their mind or be unable to complete the necessary land transfers before the exit deadline.

In total 2,706 applications were submitted; 511 (19 per cent) have since been withdrawn or rejected, leaving 2,195 applications at this point, which is 2.6 per cent of the farmers who applied for BPS payments in 2021. The number of farmers and area of their land suggests the scheme is facilitating some additional exits, but hasn’t led to a marked shift in behaviour. Based on a 50-year career you might expect 2 per cent turnover each year, although not all retiring or exiting farmers would typically transfer their land on retirement in the way that the scheme requires.

While most applications (38 per cent) have come from farmers with fewer than 20 hectares of land, our modelling suggests a higher proportion of farmers with 20-50 hectares and 50-100 hectares of land have applied when compared with the number of farms of that size in England (see chart below).

As predicted, the application rate drops from 2.6 per cent to 1.5 per cent of farmers with over 100 hectares of land. This will be due to the decision to cap payments at £100,000, deterring applications from those claiming over 182 hectares (450 acres) of lowland or Severely Disadvantaged Area moorland entitlements as they should receive more money overall by claiming annual delinked Basic Payment Scheme (BPS) payments instead.

Taking all this onboard, will the scheme achieve Defra’s goal of structurally changing the agricultural industry? No. However, it is only one element of a bigger transition plan for England’s farming industry. Technology investments, phasing out the Basic Payment Scheme (BPS) and introducing Environmental Land Management, all have a role to play in the Agricultural Transition Plan too. Combined, they aim to evolve the industry so that it is more sustainable, more productive and offers more opportunities to new entrants.

In our experience, the scheme has been used in connection with upcoming sales of farms and to facilitate some retirements from secure Agricultural Holdings Act tenancies. It may prove to have a greater long-term impact as the catalyst for recent retirement discussions even if they did not progress sufficiently for an application to be made. In an industry where succession planning could often be improved, this should be considered a scheme success too.

Defra’s own Farmer Opinion Tracker surveys suggest more farmers will actually leave the industry during the agricultural transition without using the LSES. Its latest survey in April found 6.4 per cent of farmers expect to retire or pass on the business to the next generation within the next three to five years. And a further 3 per cent expect to leave farming for other reasons.

Existing farmers are keen to expand but creating a credible support offering for new entrants is a priority too. The progress of the pilot schemes for new entrants, which focus on supporting pitches for land and finance and developing entrepreneurial skills, will be keenly watched.

Further information

Contact Andrew Teanby or Andrew Wraith

Savills Food & Farming