Sustainable Farming: Understanding the Investment Support Options

With the phasing out of the Basic Payment Scheme (BPS), the financial support system for farmers and agribusinesses in the UK is entering a new era. Going forward, subsidies will be replaced by a range of incentives linked to environmental targets.

The policy objective is to put UK farming on a more sustainable footing, including reducing carbon emissions, and to protect the natural environment while still preserving output. The incentive schemes now being rolled out aim to make it financially attractive for farmers, growers and land managers to adopt practices that prioritise healthy habitats, biodiversity, air and water quality, and natural landscapes. 

So what do these new funding schemes look like, how are they administered and what are the potential benefits to farmers?

Environmental Land Management (ELM)

The core of the new system is the award of payments, grants and subsidies linked to Environmental Land Management (ELM). The flagship scheme in this policy area is the Sustainable Farming Incentive (SFI), which is replacing Countryside Stewardship grants. The SFI offers farmers and land managers payment for adopting approved practices or ‘SFI actions’. Actions are linked to specific land use. In 2024, the scheme was expanded to cover 102 actions.

Farmers apply to join the scheme via the Rural Payments Agency (RPA). The land you apply for must be eligible for your chosen actions, and you must have what is termed ‘management control’ of that land. 

Payments under the SFI are broken down into two parts:

1. The total annual payment value for each action. This varies depending on the action and the type and size of the land involved. This is paid quarterly.
2. Management payment, which is worth £40 per hectare for the first year of the agreement, then £20 per hectare for the subsequent two years.

SFI agreements last for three years.

Another scheme under the ELM umbrella is Landscape Recovery, which offers funding for large-scale, long-term projects (minimum 500 hectares, 20+ year agreements) targeted at areas such as carbon capture and habitat protection/regeneration.

Capital Funding

The SFI does not include funding for capital costs associated with implementing improved actions, such as investment in new equipment, technology and infrastructure. There are, however, separate funding streams available to cover these. One is the Farming Equipment Technology Fund (FETF), which offers grants linked to farm equipment, animal health and welfare items, and ‘productivity’ items. 

Other capital grants are linked to delivering specific environmental benefits, such as improving water and air quality, or natural flood management. Others are linked to woodland protection and tree health.

The implementation of sustainability-focused funding for the farming and agribusiness sectors remains in a transitionary phase. While this represents a time of upheaval for the industry, it also marks the start of an exciting new era of possibility, to put farming and land management on a more secure footing for decades to come, and to unlock new potential for businesses.

Speak to an expert

To assist with that transition, Xeinadin’s dedicated agricultural accounting team offers vast experience serving farming communities and an unparalleled understanding of the unique intricacies of the industry. To find out more, contact us today. 

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