Preparing for 2025

Viewpoint

This is the last Rural Update of 2024, so I’d like to take the opportunity to wish you a happy Christmas and a prosperous New Year. Given some of the events of the past 12 months that have been chronicled in the update, including the government’s seismic Inheritance Tax reforms, the sharper-than-expected cuts to the Basic Payment Scheme and the slow rollout of environmental schemes, some readers could be forgiven for feeling less than optimistic about what 2025 may bring. There is no doubt that farming is at a fundamental turning point. For most, “business as usual” will not be an option over the coming years, but where there are challenges, there are also opportunities. Hopefully, the festive period will allow time for contemplation and the making of new plans. To get you started, here are a few suggestions worth considering from Knight Frank's Agri-consultancy team.

In this week's update

·      Sterling holds back wheat

·      China bacon boost

·      US beef import threat

·      Development and the environment

·      CAAV ups IHT raid impact

·      Seaweed cuts cow methane

·      UK food security stable

·      Renewables on a roll

·      Green energy planning boost

·      New energy source heats up

·      Bluetongue and avian flu update

·      The Rural Report – Out now

·      Property of the week

·      Country houses Q3 – Market waits for budget

·      Farmland Q3 – Prices flatline

·      Development land Q3 – Greenfield sites up

Commodity markets

Sterling holds back wheat

UK wheat values are struggling to replicate a small bounce in continental prices as the strong pound makes home-grown crops more expensive on the global market. Sterling has risen to its highest level against the euro since the 2016 Brexit referendum. However, a hike to the USDA’s global corn (maize) consumption estimates last week could provide some support for prices.

China bacon boost

Bacon and sausages from the UK are back on the menu in China as the country’s final Covid-era restrictions on unprocessed pig meat were lifted last week. China is the biggest non-EU importer of British pork, buying pig meat and offal products worth £180 million in 2023. The move should open the door to a further £80 million of UK exports, says Defra.

US beef import threat

The UK may come under pressure to accept imports of US beef and poultry if it wants a preferential trade agreement with the incoming Trump administration, reports The Guardian. In the past, the use of hormones and chlorine washes by American producers, which would not be permitted here, has allowed the UK to sidestep the issue. Now, however, some commentators are predicting that the US could remove this negotiation blocker by focusing their demands on the growing volume of beef and chicken that is produced to UK food standards.

The headlines

Planning reforms announced

The government has just released the final version of its amended National Planning Policy Framework (NPPF), which it hopes will help deliver its target of 1.5 million new homes over the next five years.

Under the revised plan, there will be immediate new mandatory housing targets (some significantly different to previous ones) for councils, which will also be required to adopt up-to-date local plans as soon as possible. Targets will be needs-based, so councils with the highest levels of housing unaffordability and greatest potential for growth will have to build the most houses.

A “common-sense approach” will also be introduced to the greenbelt. Although “brownfield-first” will remain in place, councils must review their greenbelt boundaries to meet their targets, including the identification and prioritisation of lower-quality “grey belt” land.

Councils and developers will be required to include more social rented accommodation when building new developments, with local authorities granted greater powers to build “genuinely affordable” new homes. However, an earlier proposal to ensure 50% of all homes built on the greenbelt are “affordable” seems to have been dropped.

The final version of the NPPF also gives extra weight to climate change and net zero in the planning process. For example, paragraph 163 states: “The need to mitigate and adapt to climate change should also be considered in preparing and assessing planning applications, taking into account the full range of potential climate change impacts.”

This could include providing whole-life carbon assessments for projects, covering operational and embodied carbon emissions. Please get in touch for advice on planning and residential development matters.

Defra Higher-tier details

Eagerly awaited details of the new Higher-tier Countryside Stewardship Scheme have just been announced by Defra. However, access to the scheme, which will include 99 management actions and 33 supplemental actions, is set to be limited in the first instance.

From January 2025, selected invitees will receive pre-application advice before the application window opens in July. Further details on how those who are not pre-selected can apply to join the scheme will be issued in the spring, says Defra.

Henry Clemons of Knight Frank's Agri-consultancy team says he is “really positive” about the range of options offered under the new scheme. “Higher tier is all about changing the direction of travel of a farming business, so it’s good that some options, such as soil health, have been watered down and will now be dealt with by the Sustainable Farming Incentive.

“Some of the new access options look really interesting, and there are some good coastal ones, too. I also love the agroforestry options. However, I’m really concerned that the way the scheme is being rolled out means many farms won’t realistically be able to join until 2026 at the earliest, which is a bit of a nightmare.”

For help with any grant applications, please get in touch with Henry.

News in brief

Development and the environment

In addition to its reforms of the National Planning Policy Framework (see article above), the government is also proposing changes to environmental regulations that will make it easier to build new homes (while protecting nature) as part of its forthcoming Planning and Infrastructure Bill. These include the creation of a new Nature Restoration Fund that would allow developers “to meet their environmental obligations more quickly and with greater impact”. Comments on the proposals are invited.

CAAV ups IHT raid impact

As if it wasn’t already clear enough that the figures used by HMRC to justify the government’s controversial changes to Agricultural (APR) and Business Property Relief (BPR) were seriously flawed, the CAAV’s Jeremy Moody has hammered a final nail in their coffin. Instead of the 500 farms that the government estimates will now be affected by Inheritance Tax (IHT) annually, Mr Moody’s new analysis says the figure could be as high as 2,500. Meanwhile, over 600 tractors descended on Parliament last week as farmers continued to vent their anger at the reforms. Read the CAAV’s report.

Seaweed cuts methane

As discussed over the past few weeks, there has been a public backlash to the announcement that dairy processor Arla is trialling the use of the methane inhibitor Bovaer on UK dairy farms. There is, however, growing evidence that natural seaweed supplements could work just as well. A new study by the University of California, Davis, reveals that feeding a pelleted seaweed supplement to grazing beef cattle reduces methane emissions by almost 40% without negligible impacts on health or weight.

UK food security stable

The Government has just released its 2024 analysis of the current state of the UK’s food security. It reveals that last year the production-to-supply ratio, or self-sufficiency, was at 62% for all food and 75% for foods that can be grown in the UK. This compares to 61% and 74% in 2021. However, the figure drops to just 16% for fresh fruit.

Renewables on a roll

New figures show that renewables will be the primary source of electricity generation in the UK for the first time this year. According to a report by energy think tank Ember, wind, solar and hydropower are set to produce 37% of the UK’s electricity in 2024, surpassing the 35% generated by fossil fuels. In 2021, fossil fuels accounted for 46% of our electricity, compared with 27% from renewables.

Green energy planning boost

Energy Minister Ed Miliband has just set out his department’s strategy on how to power up renewable energy production even more quickly. The actions detailed in the Clean Power 2030 Action Plan include: “cleaning up a dysfunctional grid system by prioritising the most important projects and ending the ‘first-come-first-served’ system; speeding up decisions on planning permission by empowering planners to prioritise critical energy infrastructure; and expanding the renewable auction process to stop delays and get more projects connected.”  

New energy source heats up

Although some will be cheering the above, there is a problem with wind turbines and solar farms – lots of people hate them. Now, however, new drilling techniques based on fracking technology could unleash the power of the heat contained within the Earth’s crust. Currently, it is only feasible to generate geothermal energy in a few thin-skinned places like Iceland and Kenya’s Rift Valley, but the ability to drill as deep as 3,000 metres vertically or horizontally could be a game changer, says the International Energy Agency. It reckons 15% of the world’s electricity could be geothermally generated by 2050.  

Bluetongue and avian flu update

Just in time to panic turkey producers, the government has announced enhanced biosecurity measures in avian flu hotspots to help combat the spread of the highly contagious disease. The Avian Influenza Prevention Zone covers the East Riding of Yorkshire, City of Kingston Upon Hull, Lincolnshire, Norfolk and Suffolk, although at the time of writing, there was no requirement to house birds inside.

In addition, the bluetongue restricted zone now covers all or part of the ceremonial counties and unitary authorities of Bedfordshire, Berkshire (part), Bournemouth, Christchurch and Poole, Buckinghamshire, Cambridgeshire, City of Kingston upon Hull, City of York, Dorset (part), East Riding of Yorkshire, East Sussex, Essex, Greater London, Hampshire, Hertfordshire, Isle of Wight, Kent, Leicestershire (part), Lincolnshire, Norfolk, North Yorkshire (additional part) Northamptonshire, Nottinghamshire, Oxfordshire (additional part), Suffolk, Surrey, Warwickshire (part), West Sussex and Wiltshire (part). Check out the latest restrictions and advice.

The Rural Report – Out now

The latest edition of The Rural Report, our flagship publication for farm and estate owners, looks at the numerous opportunities and challenges arising in the countryside following the election of the new government. Find out more or request a copy

Property of the week

Island opportunity

This week, we’re taking a short ferry ride to a rare opportunity on the Isle of Wight. It’s not often large blocks of land come up for sale on the island, but Great Park and Thorley Farm stretch to almost 1,500 acres. The farms’ owners have placed a significant emphasis on environmental enhancement and re-establishing a wood pasture landscape. A Grade II listed farmhouse with six bedrooms has incredible views over the surrounding farmland and woodland. The guide price for both farms is £17 million. Please contact Georgie Veale for more information.

Property markets

Country houses Q3 – Market waits

Discretionary buyers held back from a new country house purchase pending Labour’s first budget on 30 October. Offers from potential buyers were down 10% in the three months to August, according to the latest results from the Knight Frank Prime Country House Index. However, the slide in average values has slowed with prices dropping by just 1.2% in the 12 months to the end of September - the lowest annual fall since Q1 2023 - points out Head of UK Residential Research Tom Bill. He predicts a total average price slide of 2% this year, dependent on the outcome of the Budget.

Farmland Q3 – Prices flatline

The farmland market in England and Wales was also on budget alert, judging by the latest results from the Knight Frank Farmland Index. Average values for bare land nudged up by just 0.2% in the third quarter of the year to £9,351/acre. This was the smallest increase for several years. For more insight and data please download the full report.

Development land Q3 – Greenfield sites up

The average value of greenfield land values in England rose 3% in the third quarter of 2024, according to the latest instalment of our Residential Development Land Index. However, brownfield and prime central London prices stayed flat due to thin activity, with some market participants taking a “wait-and-see” approach ahead of the Budget, says the report’s author, Anna Ward. Housebuilders are also sceptical that it will be possible to deliver the 1.5 million new homes pledged by Labour over the next five years. Download the full report for more insight and data.