Some farms may struggle to produce food next year, NFU warns

Some farmers are questioning whether they can afford to produce food next year, the NFU has warned as it presses the chancellor for measures to strengthen food security in the upcoming budget.

The union is calling for changes to investment allowances, temporary interest-free loans and a reversal of agricultural tax relief reforms as MPs examine the resilience of the UK's food supply.

The warning coincides with a Public Accounts Committee (PAC) inquiry into the country's preparedness for major food supply disruptions.

The committee's evidence sessions on 12 and 15 October will hear from Oxfordshire farmer and Harry's Farm YouTuber Harry Metcalfe, alongside food industry representatives, academics and senior Defra officials.

MPs will examine risks to the food supply chain, including extreme weather and other major disruptions, alongside the country's ability to maintain supplies during emergencies.

The NFU welcomed the parliamentary scrutiny but warned that rising production costs, global instability, extreme weather and disease are placing increasing pressure on farm businesses.

It said the financial strain was weakening confidence and delaying investment, with some producers facing difficult decisions about whether they can maintain production next year.

NFU Deputy President Paul Tompkins said: “These pressures are eroding business confidence and stalling investment. For some farms, the immediate question is whether they can afford to produce food next year.”

He warned that other businesses were struggling to justify investment in the infrastructure, technology and productivity improvements needed to withstand future disruption.

The NFU wants the Annual Investment Allowance increased to at least £5 million and extended to include buildings and structures, allowing more agricultural investment to qualify for tax relief.

The allowance currently stands at £1 million, meaning the NFU's proposal would raise the limit fivefold while widening the types of agricultural investment eligible for relief.

The proposed changes are intended to support spending on productivity improvements, energy efficiency and water management.

The union is also seeking temporary interest-free Keep Britain Growing Loans to help farm businesses affected by this summer's challenges maintain production into 2027.

The proposed loans form part of a wider package aimed at easing financial pressures and improving access to investment.

On trade, the NFU wants the government to ensure the Carbon Border Adjustment Mechanism does not leave domestic food producers at a competitive disadvantage compared with imports.

It is also calling for changes to Agricultural Property Relief and Business Property Relief to be reversed, arguing that the reforms are damaging confidence in farm investment and succession planning.

Under inheritance tax changes introduced in April 2026, full relief is restricted to the first £2.5 million of combined qualifying agricultural and business assets, with 50% relief applying above that threshold.

Any unused allowance can be transferred to a surviving spouse or civil partner, potentially increasing the amount eligible for full relief to £5 million.

The government says the reforms are intended to raise revenue while retaining significant inheritance tax relief for farms and businesses.

However, the NFU argues that the changes are creating uncertainty for farming families planning succession and making long-term investment decisions.

Further proposals include enhanced capital allowances for both incorporated and unincorporated agricultural businesses investing in low-carbon technology and infrastructure.

The union believes these measures would help farmers move beyond immediate financial pressures and make longer-term decisions about productivity and business growth.

It has also highlighted the government's repeated statements that food security is fundamental to national security, arguing that maintaining domestic production depends on financially viable farming businesses.

While the parliamentary inquiry is examining the UK's wider food supply resilience, the NFU wants the chancellor to address the financial pressures facing primary producers through the Budget.

Mr Tompkins said: “The PAC is right to ask questions about food resilience. The budget in a few weeks’ time gives the chancellor an opportunity to act, helping British farmers build resilience and strengthen the nation’s food security.”

The NFU maintains that reducing production costs, improving investment incentives and addressing uncertainty over agricultural taxation are central to supporting Britain's long-term food production capacity.