The Budget: What does it mean for farmers?

Terrafarmer’s Agribusiness Consultant, Jack Pierce, considers the challenges—and opportunities—for farming businesses presented by the budget

Looking at social media and the farming press this morning, it is fair to say that Labour’s first budget for 14 years has sparked significant concern among British farmers.

The changes that Chancellor Rachel Reeves announced in the budget on 30th October, particularly in terms of taxation and agricultural funding, have left many in the farming community worried about tighter margins and succession challenges, as well as potentially higher food prices.

A blow to farm succession

One of the most contentious announcements in the budget involves modifications to Agricultural Property Relief. This attempt to raise public money could have unintended consequences for farmers and will likely affect a range of farms, both small and large, further intensifying issues related to succession planning and the financial stability of family farms. The potential to burden future generations with higher costs or even discourage them from continuing in the farming profession has added to industry concerns.

Stagnant funding in the face of inflation

Despite chatter in September in the farming press about potential cuts of up to £100 million, the agricultural budget will remain at £2.4 billion for the next two years. Nevertheless, as the agricultural budget has effectively remained unchanged since 2014, this still represents a cut in real terms—especially when you take inflation into account.

We are halfway through the agricultural transition and it is vital for farm businesses to engage, evaluate, and adapt.

Changes to the Basic Payment Scheme

Defra has since announced more details on the delinked payment of the Basic Payment Scheme (BPS). Next year will see a 76% reduction of the first £30,000 of a payment, with a 100% reduction for any amount over £30,000. This means the fastest reduction in subsidy for large farm businesses. For example, a 450-ha business that claimed around £100,000 in 2020 will only receive £8,000 next year. This will obviously pose significant financial challenges, especially for farms heavily reliant on this income to offset high operational costs.

The government has also confirmed the introduction of the carbon border adjustment mechanism (CBAM) from 2027. This mechanism will levy a ‘carbon price’ on goods imported into the UK that contribute high amounts of GHG emission and could lead to increased fertiliser prices.

More positive news

Some welcome news: the government has committed £60 million through the Farming Recovery Fund to help those farm businesses affected by adverse weather events, and the Rural Payment Agency is contacting farmers “immediately”.

Labour has also pledged to allocate £58 million for research and innovation to increase climate resilience in the sector and aid the transition to net zero. Hopefully, this will lead to the release of agri-based Innovate UK grants, fostering the development of climate-focused products, services, and technology for farmers to manage environmental impact and improve sustainability and resilience.

Moving forward: recognising opportunities amid challenges

While every farming business is different, these are elements I would advise everyone to consider:

1. Review your farming practices
   Look at ways to improve margins by farming more sustainably. Embrace innovation and improve soil health, reducing reliance on costly inputs through structured management plans.
2. Undertake a business review
   Allow someone with a fresh set of eyes to analyse the business. You can do this for free under the Future Farm Resilience Fund. Get in touch today!
3. Engage with new grant funding
   Whether it’s the Sustainable Farming Incentive (SFI) or capital funding under Countryside Stewardship, a huge amount of funding is available now. A short meeting with the Terrafarmer team could be the most valuable time you haven’t yet spent!

Final thoughts

We are halfway through the agricultural transition and it is vital for farm businesses to engage, evaluate, and adapt. Labour’s recent budget marks a turning point for the agricultural sector, bringing a blend of challenges and potential opportunities. While the initial impact may feel like a bitter pill for many, those farmers who adapt and leverage the available resources will find ways to thrive within this evolving landscape. The key, however, will be resilience, innovation, and a proactive approach to the future.

Get in touch for independent advice today. Use our Contact page to book a free 30-minute chat at a date and time that suits you.