DEFRA’s surprise announcement in March 2025 to close the Sustainable Farming Incentive (SFI) scheme until further notice caused much anger and frustration among the farming community, and was a further blow following the announcements made in last October’s budget on changes to Inheritance Tax reliefs.
In May, around 3,000 farmers (who had started but not submitted their applications within two months of the closure) were given the opportunity to complete their applications. While this was welcome news, the support was limited.
The Chancellor has since announced a better-than-expected DEFRA budget at the recent Spending Review, with an overall settlement of £7.4bn. This brings some cautious optimism but is still a real-term cut of -2.3% and there remains uncertainty about the future of environmental farming programmes.
Spending review funding for environmental schemes
Rachel Reeves confirmed that £2.7 billion annually will be allocated to farming and nature recovery initiatives between 2026 and 2029.
Of this, £2.3 billion per year will fund the Farming and Countryside Programme - which includes SFI, Country Stewardship, Landscape Recovery and capital grants - with an additional £400 million available through supplementary nature schemes. There is also continued investment in the Environmental Land Management (ELM) scheme, with funding set to rise to £2bn by 2028/2029.
The details of how this funding will be allocated between the various schemes and how they will be implemented - including when or if the SFI scheme will return, and in what form - remains to be seen. Until these details are clarified, farmers will continue to face uncertainty about the specific support available to them. With the closure of the SFI Scheme and the capping in 2025 of the final basic (delinked) payment (BPS) at £7,200, before it ceases altogether, there is currently no direct farm support from the government in England.
How can farm businesses look to improve cashflow?
Whilst buoyant livestock prices and a milk price that has continued to recover offer some welcome relief, cashflow on farm will need to be carefully managed where an anticipated income stream from SFI will no longer be available.
There have been some good profits made during the year to 31 March 2025, but the pressure on farmers looks set to continue.
Our advice to those who have missed out is to stay calm, consider your options, seek advice, and don’t make rash decisions.
If you would like further advice or support for your farming business, please get in touch. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
