From a government subsidy system focused on food production as an output and direct support payments, received through a transparent application process, the pendulum has swung to a system of public money for public goods.

Under this approach, government funding focuses on environmental protection and recovery as an output, and a single pot of money is awarded on a first come first served basis. While the SFI budget has increased over the period 2024/2025 (£305 million) to 2025/2026 (£738 million), this has not been due to an overall increase in the farming budget but rather it reflects the continuing reallocation of the budget from direct payments to environment land management schemes. The current allocation for 2026 includes £560 million for existing agreements and £253 million allocated in the recent application window.

Lessons from the latest SFI application window

The SFI Window 2 opened on Tuesday 22 September at 10am and the £253 million was allocated by 3:52pm equating to £702,777 per minute. Defra confirmed 12,200 applications were made, but many farmers and land managers did not get an application submitted in time and some of those that did had to alter their applications due to errors within the technology behind the application platform.

This process does not feel aligned with allocating public money to achieve outcomes that will drive economic growth through food production and environmental protection and recovery. Decisions will have been made in haste, options and fields will have been left out due to the challenges of the system and businesses that were unsuccessful in submitting their application will be fraught while trying to establish sources of future income and review their business options.

Defra has stated the process for 2027 will be reviewed, with particular emphasis on finding an alternative to the first come first served approach. The Country Land and Business Association (CLA) has questioned how the fundamentals of the scheme can work to deliver across multiple objectives – the scheme design being one element and the processing of the application another. For future schemes, the focus needs to be on an application window open for a well-publicised period of time, followed by an evaluation stage to ensure outcomes are being met, along with a realistic budget to support the ambition.

The Farming Roadmap published earlier this year clearly indicates the future of direction of travel for Defra support. It states that while food production is a primary output of farming, Defra envisages a withdrawal of its financial support as many options currently being funded will be regulated and the expectation is that the private markets will increase their support.

Farming businesses, whether successful this time or not, must continue to review, question and refine what they do to future proof. Actions to take include:

1. Undertake a full business review and project forwards for the next three to five years. Which enterprises are making money, what aren’t and why? Can anything be changed and forecasted to turn a profit? Operationally, are there any changes to be made such as machinery changes/pooling machinery/contracting out elements of the business? In some cases, this analysis may lead to the conclusion that enterprises still won’t be profitable, leading to challenging decisions.
2. Talk to the supply chain. Look for contracts offering suitable premiums. Savills research undertook an analysis of over 60 supply chain contracts earlier this year, many were paying premiums where certain conditions/standards were being met and evidence could be supplied. Other contracts, although not paying a premium, offered incentives such as longer-term contracts or knowledge sharing.
3. Look at nature markets and where alternative sources of funding could be available. Examples include water companies: Anglian Water has recently launched the Catchment Regeneration Fund. Defra’s FiPL (Farming in Protected Landscapes) programme has been extended, running to March 2029, and is open to farmers and land managers within a National Landscape or National Park in England, or the Broads, and offers capital funding to support projects benefiting climate, nature, people and/or place. There are specific geographical programmes to look out for too, for example Water Resources East in partnership with Cambridgeshire County Council is offering an Agricultural Water Resilience Grant to support farmers and growers.
4. Look at restructuring any debt to maximise cashflow. Options may allow a decreased monthly outgoing or timing payments to coincide with income such as livestock sales and harvest income.
5. Talk. Mental health challenges are already significant in the agricultural sector and recent events will continue to add pressure for many.

Further information

Contact Kelly Hewson-Fisher