Patchwork of grants and strategies set to support farmers post-BPS

With the Basic Payment Scheme on its way out for farmers – how many have truly prepared for life after the scheme disappears for good?

Ian McKenzie, associate partner at property consultancy Fisher German, explains the post-BPS landscape and what options are out there.

BPS was an important subsidy for many farmers in England for a number of years, but the payment is now being phased out following Brexit.

A typical 100-ha farm has already lost 35 percent of its BPS income since payments started decreasing in 2020, and a 500-ha farm has lost 44 percent.

With payments set to reduce further, farmers need to take the initiative and find new ways to fund their enterprises.

A direct replacement for BPS has not emerged, instead, there is a patchwork of grants and other strategies that can help farmers with their bottom line.

In the main, the bulk of government grants out there tend to be awarded to farms that prioritise environmental benefits.

For example, the Countryside Stewardship (CS) scheme provides financial incentives for farmers to conserve and restore wildlife habitats, create new woodland, improve flood risk management, and more.

In addition, the Sustainable Farming Incentive (SFI) pays out per hectare to farmers that undertake sustainable soil management plans.

While these are useful new sources of income, government grants are not the only way to monetise environmental credentials.

A private market is also emerging for sequestered carbon in soil on farms that companies can purchase to offset their emissions, with similar markets already available for woodland and peatland.

However, not every farm has the capability to make changes like this to the extent that their farm becomes profitable.

Another solution that we expect to see more of in the near future is contract farming – where the farmer essentially hires in labour and machinery but still plays a role in farm management.

This is different from simply letting a farm out to a tenant. For starters, a farmer can sell his working capital as machinery is provided by the contractor and removes the burden of finding and maintaining employment. Indeed, tenant farmers can also enter into contract agreements.

And there are benefits from a tax point of view, as HMRC views the farmer as ‘active’ which means tax relief can be applied for.

With farming being an increasingly ageing occupation, contract farming could be a smart solution for many looking to save money in the long term.

It is important to stress that every farm is different and that no ‘one-size-fits-all’ solution exists, so farmers need to do their research before committing to anything.

Farmers need to assess where they want to be in two years, five years, and a decade, and what would be the best ways for them to get there.

The issue for farmers is that legislation and grant schemes have been rapidly changing of late and it can be difficult for many - especially those who have farmed for a long time - to get their heads around the various options.

There are likely to be a handful of farms that struggle to adapt as BPS winds down, but the sooner farms create a clear plan for their futures, the easier it will be to navigate.