Report predicts ‘economic shock’ for South West rural economy from changes to farming payment scheme

May 9, 2022

New research published today (9th May) identifies £883 million is predicted to be lost from the rural economy up to 2027 across Cornwall, the Isles of Scilly, Devon, Dorset and Somerset.

Farmers and other land managers are coming to terms with the move away from Common Agricultural Policy (CAP) support, but the transition is proving difficult, and the replacement Sustainable Farming Initiative (SFI) has had an uncertain start in the region.

The report, undertaken by the Countryside and Community Research Institute (CCRI) at the University of Gloucestershire with support from the National Innovation Centre for Rural Enterprise (NICRE), was funded by the Cornwall and Isles of Scilly LEP, Dorset LEP, National Farmers Union (NFU) and Heart of the South West LEP to shed light on the impact new payment schemes will have on the farming and rural community across the South West. The three LEPs make up the Great South West powerhouse, working together to deliver shared objectives for the region’s economic growth and prosperity.

As farmers transition from the Basic Payment Scheme (BPS) to the new Environmental Land Management schemes (ELMs), they will receive direct support for better land and nature management, and by 2027 BPS funding will be completely phased out. The Department for Environment, Food & Rural Affairs (Defra) is introducing the replacement SFI payment, but the package of support is expected to be worth much less overall. With other ELMs funding still in development, the wider impact on rural economies is uncertain.

Chris Short, Associate Professor in Environmental Governance at the CCRI, University of Gloucestershire, co-investigator at NICRE and lead researcher on the report, said: “The impact of the transition on the South West’s agricultural sector and wider rural economy should not be underestimated. Many farms in this region are typically small, family businesses, particularly vulnerable to a loss of support. This funding is disappearing, just as living and business costs are rising sharply across the country. Any reduction in spending at farm level will have a direct impact on the wider rural economy. The impact of these changes will also be felt far beyond the farm gate.”

The report indicates that with up to £440 million less to spend on materials and services, there will be a significant knock-on for local jobs and businesses. The South West’s rural economy, which is dependent on small, family-run farms, is particularly vulnerable to the financial impact of the transition. With farming being a significant driver for the region’s economy, the predicted impact on the sector’s supply chains, producers, suppliers, business owners and workers is widespread.

Although there has been a mixed response from farmers to the emerging SFI programme, Devon County Council have seen some good results from those farms involved in their pilot Future Farm Resilience Project (2020/21), which offers them business advice and support.

Mel Squires, Regional Director of NFU South West, said: “As our family farming, food producing businesses, related supply chains and the wider rural economy battle with significant cost inflation, the scale of reductions in available funds to businesses laid bare by this report is considerable and can’t be ignored. The effects will be multiplied, as the wider counties, regional economy and benefits to local communities will be impacted, and that is why we are seeking Government support for a whole farm approach to holistic business advice and support at a period of already significant change.

“We need to give confidence to our family farms to plan for the future in unprecedented times, and take advantage of the opportunity that change should also bring, continuing to produce high quality, local food, identifying new markets, delivering public goods, investing for net zero, and supplying the public sector.”

Clare Parnell, Director and Rural Lead of the Cornwall and Isles of Scilly LEP, said: “This report is a wake-up call about the aftershocks we can expect through the rural economy from one of the biggest shake-ups in farm policy for 50 years. It shows rural areas need help to keep pace with the speed of transition, otherwise we start to erode the very fabric of rural life, including the ability to produce our own food and safeguard the countryside.

“But this is about much more than farming. Our close-knit supply chains rely on each other to survive and thrive, from the village garage and veterinary practice to the farm shop and local abattoir. Fortunately, it is not too late, and we are starting to see some pilot projects make a real difference on the ground by helping businesses improve performance and take advantage of new opportunities. But we need policymakers to accelerate that support if we are to head off an avoidable rural catastrophe.”

Luke Rake, Board Member of the Dorset LEP and Chair of the Dorset LNP, said: “The significant shift in agricultural policy and associated post-Brexit transition represents a challenge for the food production and land management industry, and I welcome this report. Whilst the increased focus on biodiversity recovery and farming for public good is welcome, there is also a need to ensure this transition is handled carefully and the report clearly shows a major financial risk for the sector. This is particularly acute in the South West region, where rural resilience relies on a network of family and smaller farms which are the backbone of the communities in which they sit.

“As Principal of Dorset’s specialist agricultural college, the future of the young people we serve is closest to my mind. Shifts in policy need to be matched with appropriate support to enable our food security to be maintained, the next generation of land managers to develop, and the rural villages and towns of the South West to thrive.”

Karl Tucker, Chair of the Heart of the South West LEP, said: “As the country’s agricultural heart, farming is a significant driver in the South West’s economy. The loss of farm income outlined in this report will have an impact across the rural economy. This report clearly states that the sector faces difficulties during this transition, and It is vital that we work together to tackle those challenges.

“Local authorities are currently developing plans to allocate funding from the UK Shared Prosperity Fund (SPF). This report shows that high quality support for the rural economy must be fully incorporated into their proposals.”

The report makes clear that the loss of income over the payment transition period will have a widespread impact on the rural economy, businesses and jobs. Local authorities are being called on to help mitigate the impact of the transition by ensuring the needs of the rural economy are fully incorporated into their emerging SPF Investment Plans, which will be submitted by August for delivery in October this year.

Ongoing support from local business support services, such as Growth Hubs, will also be vital in supporting the sector through the changes. Whilst Growth Hubs have seen a drastic 50% funding cut this year, improvements to the Growth Hub funding settlement would ensure their services can support local businesses as they navigate the financial impacts of the new payment scheme.

The full report is available to download here from 9th May: