Bridging the Subsidy Gap
What do we know?
With significant changes to subsidy funding on the horizon, the need to diversify agricultural businesses and spread risk is now more crucial than ever.
Landowners need to evaluate their gross margins and profitability in light of the forthcoming subsidy reductions, and consider how their diversification options could assist with this, if deemed appropriate.
The current Government has committed Basic Payment Scheme (BPS) funding for 2019 and 2020. Prior to the deadline of 15th May, Sworders have been actively involved in preparing BPS claims for their clients.
The UK Government has been very clear that when we leave the EU we will also leave the Common Agricultural Policy (CAP) and therefore we will be free to implement our own domestic agricultural policy, as detailed in the Agriculture Bill.
The proposals put forward by the Agriculture Bill will see BPS funding phased out from 2021 to 2027. Simultaneously, from 2025 new Environmental Land Management schemes (ELMs) will be introduced, whereby landowners will be paid for the environmental benefits they can provide, rather than payments linked to entitlements.
Whilst the level of BPS reductions for 2021 have been announced, there are no further details on how the transition from BPS will progress after this. In light of these deductions, farms need to consider their profitability without a subsidy. With these uncertainties in mind, diversification could provide opportunities for landowners to spread their risk. Over the next two pages we have set out some of these opportunities for landowners to consider in light of subsidy funding cuts.