The uncertainty around farming subsidies as a result of brexit lowers land costs
The uncertainty created out of brexit is spilling over to the agriculture sector now. There are fears regarding the future of farming subsidies after brexit which has led to a fall in farmland prices in the UK. Anticipating an adverse brexit impact, the value of British farmland fell by more than 8 per cent last year, figures by property consultancy Carter Jonas indicate. According to the figures, the price of rural land was £8,972 per acre at the end of December, dropping from £9,778 at the same point a year previously. However, except in the south east, the figures are expected to recover over the next 12 months. In the south east, a slower price recovery is expected.
The head of rural at Carter Jonas, Tim Jones said that the ongoing Brexit negotiations mean that the outlook for rural property will remain uncertain, however, the release of the UK’s agricultural bill this year will be an opportunity to clarify key issues, including farming productivity and environmental enhancements. Jones said that this will help restore confidence to the market generally and particularly to existing and future rural landowners, potentially increasing sales and improving prices. Selling land for development has been a useful way for farmers to generate more money.
Meanwhile, the EU has a system of subsidies called CAP for the farmers of its member states. Under the system, a minimum level of food production is guaranteed to ensure that farmers have an acceptable standard of living. The share of CAP in the EU budget is 40 per cent which was once 70 per cent. Among the member states, the relatively urbanised economies contribute funds, while comparatively agrarian countries are the beneficiaries. Among the member states, France was historically one of CAP’s biggest beneficiary countries, but it has become a contributing country in recent years. The surplus CAP goods are exported to developing countries. At present, farming subsidy is a central issue between the EU and the UK and support payments to be received by farmers in the UK after brexit is not yet known.
Environment Secretary, Michael Gove told farmers earlier this month that the Government will guarantee subsidies at the current EU level until the 2022 election, after which there will be a “transitional period” to a new system. He further said that across the whole of the property sector, returns will be 4.6pc this year, which is an improvement on the 3.6pc achieved in 2017 but way below the highs of 15.2pc seen in 2015.