The future of farming and rural finance

During summer 2020, farming and rural industries in the UK have entered a period of unprecedented challenge and change. Hit with the realities of pandemic lockdown and the country’s full departure from the European Union in January 2021, there is much uncertainty about the future of the industry.

If you take the food area of the industry alone, it is central to our society, with one in eight of us earning a living in this sector. Demand is high for quality food, while Brexit has reduced the number of EU migrant workers to pick the produce.

In April 2020, the increased consumption pre-lockdown left some shortages, while the British Farming industry required 90,000 fruit and vegetable picking jobs. Calling on furloughed  Britain's to fill the gaps and get the produce from field to shelf, to plate, this could be the first indication of new self-reliance on UK labour to handle this work.

At its very heart, the UK farming industry faces funding uncertainty, exasperated by the current climate. Exactly how the Government’s replacement for the EU’s Common Agricultural Policy (CAP) will shape up remains to be seen.

Listening to concerns raised by the industry towards the end of 2019, the Department of Environment, Food and Rural Affairs outlined new proposals in their report ‘Farming for the future – Policy and progress update’ in February this year.

Stating that the “CAP was too often a blunt instrument”, they aim to create a replacement policy “to create a series of schemes which are targeted at enhancing our environment, protecting our countryside and conserving our livestock; designed in a way that is accessible for farmers, growers and other land managers in England and that will provide high value for money for the taxpayer.”

As part of the Environmental Land Management Scheme (ELM), “farmers, foresters and other land managers will be paid for managing their land in a way that will deliver against key 25 Year Environment Plan goals: clean air; clean and plentiful water; thriving plants and wildlife; protection from and mitigation of environmental hazards; beauty, heritage and engagement with the environment; mitigation of and adaptation to climate change, particularly to support the delivery of our net-zero targets”, states the document.

The plan focuses on delivering food and harnessing change to create a more environmentally sustainable farming industry in its wake.

Before these updates, proposals for new subsidies and rural trade policies came under fire from the National Farmer’s Union (NFU) for threatening food production and being damaging to rural livelihoods, as explained in this independent article from September 2019.

Certainly, however, the ELM is delivered it has some big shoes to fill. Farmers and rural workers have relied heavily on EU subsidies since 1972. Defra estimates released in 2014 out UK farming incomes as high as 55% from the EU, with £28bn expected to have been injected into the industry between 2014 and 2020.

Rightly, many farmers are concerned that any new process will leave them with a shortfall, or that rolling out something comparable will take some time.

But, alongside the uncertainty, the outlines of the ELM do offer some serious reassurance for those concerned about the continued funding of their rural business. Alongside proposed subsidies grants will be available to farmers, foresters and growers to invest in equipment, technology and infrastructure to improve their business.

The report states, “The grants will help producers to focus on more efficient production methods that will reduce costs, improve yields and give them a better return. We will also support farmers who want to process and add value to their products, create new products, or sell their produce directly to customers.” This grant scheme will come into play in 2021.

The ELM itself will enter into a national pilot in 2021, to test it out, before launching fully in 2024. Built on three tiers of funding, it is intended to sustain this vital industry, improve the environment and meet the societal demands of agriculture.

Regardless, farmers and landowners have been finding new ways to diversify their businesses into areas like film screenings, music events, adventure tourism, holiday homes and commercial woodland. While all these have been hit by the current lockdown, using these new means to remain competitive will likely continue in an upward trend well into 2021 and beyond.

It is likely that, no matter how farms operate commercially over the next few years, many people working it that and other rural industries, will need to seek finance to acquire the assets and security they need to operate.

As experts in Farm and Rural Finance, we will be monitoring the developments over this summer and into 2021. Working with our finance partners we will offer the right support to help rural businesses flourish with the right finance options regardless of the situation.

All rural workers and farmers can do for the moment is to be optimistic that the Government will deliver on the promises of the ELM and keep an eye on developments.