Farm rents diverge as informal agreements hit decade high

Formal farm rents fell in real terms last year, while informal agreements climbed to their highest nominal level in a decade, new figures show.

Data covering 2024/25 reveal contrasting trends across tenancy types, with inflation continuing to erode headline increases and exposing pressure points in England’s rental market during the fourth year of the Agricultural Transition.

The average annual rent for Full Agricultural Tenancy (FAT) agreements dropped 6% in current prices to £174 per hectare. Once adjusted for inflation, the previous year’s figure equated to £193 per hectare, meaning FAT rents declined by 10% in real terms.

Farm Business Tenancy (FBT) rents rose 4% in cash terms to £230 per hectare, but this represented little change once inflation was taken into account.

By contrast, informal agreements recorded the strongest growth, increasing 8% to £253 per hectare — the highest nominal figure in the past decade and a 4% rise in real terms.

Seasonal agreements edged up 2% to £166 per hectare, though in real terms this amounted to a 2% fall.

The figures are used by tenant farmers and landlords when negotiating rents and by Defra to inform statutory succession decisions. They relate to the 2024/25 Farm Business Income results and come at a time when Basic Payment Scheme reductions and volatile farm incomes are reshaping business planning.

The divergence between formal and informal arrangements has raised questions about whether headline FBT data fully reflect conditions on the ground.

Legal experts suggest the growth in higher-rent informal deals may be obscuring stronger upward pressure elsewhere in the market.

“The growth of higher rent informal farm agreements may be masking stronger underlying increases in FBT rents,” said Maddie Dunn, legal director at Charles Russell Speechlys.

“With many of these longer term informal arrangements likely to be unwritten FBTs, the relatively modest real terms movement shown in the formal FBT data may not capture the full picture of rent inflation in the sector.”

She added that the pattern reinforced calls to encourage more secure, long-term arrangements.

“This trend also strengthens the case for incentivising longer term, formal tenancies, as highlighted in the recent farming profitability review led by Dame Minette Batters.”

Rental levels varied widely by sector. LFA grazing livestock farms recorded the lowest average rent at £93 per hectare, while dairy farms paid the highest at £285 per hectare.

Regional disparities were equally pronounced. Farms in the North West paid an average of £151 per hectare, compared with £259 per hectare in the West Midlands — a gap of more than £100 per hectare.

Landlords argue that rents reflect land values, demand and long-term asset considerations, while tenants remain focused on profitability as direct support payments continue to taper.

With farm incomes under pressure and support schemes evolving, movements in land rents are likely to remain under close scrutiny as the Agricultural Transition progresses.