The Rural Update: More positive news needed

Viewpoint

Reading through the articles in this week’s Rural Update, you’ll find a mixed bag of news. There are some bright spots: it’s welcome, for example, that Tesco is planning to pay its farmer suppliers millions more for delivering greater environmental benefits, and that Defra’s Nature Restoration Fund seems to be making some progress. But it’s frustrating that public bodies are failing to deliver on the government’s pledge to source more food from British farmers, and that Chancellor Rachel Reeves is apparently considering more property taxes that could hit rural businesses already struggling with wafer-thin margins. Even more concerning, though, if true, are predictions that chronic climate and nature degradation in the UK could reduce GDP by 4.7% by the end of the decade. That’s a lot of money in not many years. Yet another reason why a vibrant farming sector with the confidence to invest in the future is vital to the UK’s economy, natural environment and food security. As the poll results discussed below reveal, that would be an awful lot more popular with the public than ploughing billions into untested carbon capture and storage schemes.

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Commodity markets 

OSR resurgence coming?

New figures from Defra highlight shifts in English crop production. The results of its June Survey of Agriculture confirm a 9% increase in the country’s wheat and oats areas to just over 1.5 million and 162,000 hectares, respectively. However, the area of barley grown slipped 13% to 742,000 hectares, the lowest since 2015. Oilseed rape was the biggest faller, down 18% to 204,000 hectares. However, while average wheat yields seem to have slipped by around 9% this harvest, rape yields could hit a record high, possibly even breaking the 4t/ha barrier, reports United Oilseeds. This could see a big rebound in the crop for next season.

Dairy boost

Farmgate milk prices continued to rise in July, according to the latest Defra statistics. On average, dairy farmers received 44.39p/litre, a 1.9% increase on June and an 11% hike compared with July 2024. 

The headline

More property taxes?

With Chancellor Rachel Reeves’ second Autumn Budget just around the corner, speculation is mounting that further property taxes, some of which could be bad news for farmers and estate owners, are on the cards to help balance the books.

One of the proposals would see stamp duty land tax scrapped, with the lost income replaced by a seller’s tax on high-value properties and a long-overdue council tax re-banding.
More ominous for those landowners with portfolios of let properties is a suggestion that National Insurance could be applied to rental income.

Scrapping Private Residence Relief on the sale of homes over £1.5 million, meaning sellers would have to pay tax on any capital gains even if the house was their main residence, has also been mooted.

Tom Bill, Head of UK Residential Research at Knight Frank, offers a thought-provoking take on the rumours and the reaction of the bond markets. 

Food procurement fail

A new report from the Countryside Alliance has found that the public sector is still not throwing its purchasing power behind British farmers, despite promises from the government to source more of the food served by schools, hospitals, local authorities, government ministries and the army locally. 

As part of its Backing British? Benchmarking Public Food Procurement investigation, the organisation submitted Freedom of Information requests to 19 central government departments, 215 local authorities and the British Armed Forces about their food procurement policies.

Only one government department, the Foreign, Commonwealth and Development Office, had a policy relevant to the procurement of British food, while just 26 local authorities (12% of all those asked) were able to report data concerning what proportion of the food they procured was produced in the UK. 

Seventy councils indicated they do not have any relevant policy associated with procuring British food, and there were 42 councils for which no response was recorded. 
As part of its manifesto before winning the last General Election, the government pledged: “We will champion British farming whilst protecting the environment. We will set a target for half of all food purchased across the public sector to be locally produced or certified to higher environmental standards.”

News in brief

Tesco farming boost

Tesco, the UK’s largest retailer, has launched a new scheme that will reward farmers in its dairy, pig, lamb and beef sustainable farming groups for delivering enhanced environmental and animal welfare benefits. From September, for example, 260 UK dairy farmers who supply liquid milk through processor Müller UK, will earn up to an extra 2.5p/litre if key targets on emissions reductions, animal health, feed conversion efficiency and genetic improvements are achieved. Tesco estimates the scheme could pay out £9.5 million in its first year. 

Nature loss GDP impact

Chronic climate and nature degradation in the UK could reduce GDP by 4.7% within this
decade, according to a new report from the Green Finance Initiative and WWF. Business Investment in Nature: Supporting UK Economic Resilience and Growth claims soil degradation costs the economy £1.4 billion each year, while housing delays due to water shortages could add up to £25 billion over the next five years. To unlock investment at the scale required to mitigate the damage, the report calls for the development of sector-specific Nature-Positive Transition Pathways supported by departments across government.

Net-zero tech scepticism

One area of heavily funded climate change investment the public doesn’t appear keen to support is carbon capture and storage (CCS). According to the results of a YouGov poll for ClientEarth released today (3 September), only 7% of the UK public views CCS as a priority for tackling climate change, despite the government planning to spend over £50 billion subsidising the technology, with three-quarters of the cost falling on consumers. Cheaper, popular solutions such as renewable energy (38% public support), home insulation (20%), nature protection (23%) and public transport (17%) are more popular.

Scottish support payments 

The Scottish Government has announced the 2025 Basic Payment and greening rates that farmers will receive. Payments have dropped marginally to account for higher payments to young farmers and new entrants. In Region 1 (better quality agricultural land), they will total £223.01/ha; in Region 2 (rough grazing) £45.27/ha; and in Region 3 (rougher grazing) £13.72/ha.

Nature restoration schemes 

An innovative nature restoration scheme featured in the last edition of The Rural Report has been announced as the first to enter the implementation phase of the government’s flagship Landscape Recovery scheme, which utilises a blended finance model of public and private investment. Boothby Wildland is a large-scale nature recovery project near Grantham, Lincolnshire, covering 620 hectares of former Grade 3 arable farmland bought in 2021 by Nattergal, a nature restoration company. Read our interview with Archie Struthers, Nattergal’s CEO, to find out more.

The Rural Report SS 25 – Out now

The Spring Summer 2025 edition of The Rural Report, Knight Frank’s flagship publication for rural businesses, which looks in more detail at many of the issues discussed in The Rural Update, is out now. The new report includes the latest news, research and insights from Knight Frank’s rural property experts, as well as thought-provoking contributions from some of Britain’s most iconic estates. Available online and in print, you can click here to access the full report. 

Properties of the week

Scotland island idyll

Shuna Island could be the ultimate Scottish hideaway for somebody who loves farming, nature, history and country sports. The history of the completely private 1,110-acre island near Oban, off the Argyll coast, spans 9,000 years, starting with Stone Age burial mounds and including a mention in the Vita Columbae. There are 81 acres of permanent pasture, 640 acres of rough grazing, and over 300 acres of native woodland and foreshore. In terms of accommodation, the island has numerous options, from timber lodges to more substantial farmhouses, and even castle ruins. Red and fallow deer roam freely, alongside woodcock, snipe, and a long tradition of pheasant shooting. For over 50 years, the owners have hosted renowned woodcock shoots and deer stalking during the autumn rut. For more information please contact Tom Stewart-Moore.

Historic Kent estate home to rent

If you need a place to stay while you get started with your new vineyard, Knight Frank’s Rural Consultancy team in Kent has an intriguing option on offer. Newhouse at Mersham, near Ashford, which was once home to Countess Mountbatten of Burma and Lord Brabourne, is part of the idyllic 2,700-acre Hatch Park Estate. Now available to rent, the nine-bed period property costs £7,995 a month. For more information, please contact the team’s Katie Bundle.
 
Discover more of the farms and estates on the market with Knight Frank

Property markets Q2 2025

Development land – Market weakens

The value of development land continues to fall, despite the government’s pledge to build 1.5 million new homes during this parliamentary term. According to the newly published Q2 2025 instalment of the Knight Frank Residential Land Index, prices for green and brownfield sites have dropped by 5% over the past 12 months. Lower levels of supply mean values in London slid by just 2.5%. Housebuilders are grappling with planning delays, viability challenges, skills shortages and weak demand, explains Oliver Knight. 

Farmland – Uncertainty dominates

Despite cuts to support payments and lacklustre grain prices, the average price of bare agricultural land fell just 2.3% in the second quarter of the year, according to the latest edition of the Knight Frank Farmland Index. “It’s really difficult to discern any clear value trends at the moment because of reduced transaction levels,” says Will Matthews, Head of Farms & Estate Sales. Download the full report for more data and insight.

Country houses – buyers’ market

It’s a buyers’ market when it comes to rural homes, according to the latest research from Tom Bill, Knight Frank’s Head of UK Residential Research. The Knight Frank Prime Country House Index slipped by 2.5% in Q2, the second-largest quarterly decline since Q1 2009. At the same time, the number of properties for sale is up 9% compared with this time last year. On average, there are six prospective buyers for each new instruction, compared with 19 at the height of the Covid-19 pandemic, while sales are achieving 94% of the asking price. Read more of Tom’s numbers and insight.