Experts have identified what they think will prove to be the biggest themes facing farms in the coming year and how there may be ways to turn challenges into opportunities.
Below, Rhodri Thomas, who is Strutt & Parker’s head of rural, has provided six key themes that will define 2025 for the British farming industry.
Taking a proactive approach to challenges – from changes to the tax regime through to the growing impact of climate change – may help farms to navigate the uncertainty and put them in a stronger position.
Last year was challenging, marked by a difficult start due to extreme weather and ending under the looming impact of a range of measures announced in the autumn budget.
Confidence, particularly among farmers, is low and many are seeking support and guidance on ways to improve resilience and long-term financial and environmental sustainability.
We have identified what they think will prove to be the biggest themes facing farms in the coming year and offer some thoughts on how there may be ways to turn challenges into opportunities.
Make succession planning a positive
The number one issue facing most farms in 2025 is likely to be succession planning, following the changes to the inheritance tax regime announced in October 2024.
Industry representatives continue to lobby for the policy to be reversed or amended and everyone is closely monitoring these developments.
However, for now, businesses whose tax planning has previously relied on the availability of Agricultural Property Relief and Business Property Relief without a cap, have a 16-month window to put the right building blocks in place to reduce their tax liability.
This will require careful thought, so families will want to work with their agents or consultant, solicitor and accountant to work out how best to pass on assets, to whom and when.
While the trigger for people needing to prioritise succession planning may be unwelcome, the process can prove to be extremely valuable and lead to positive changes.
It can be the starting point for important conversations about the future and how best to maximise assets and opportunities.
Budgeting to for long-term profitability
The outlook for farm profitability remains challenging in 2025, with larger farms in England now also facing deeper-than-expected cuts to de-linked farm payments.
Rising labour costs, driven by increases in the minimum wage and national insurance, will also put a further squeeze on margins.
Against such a backdrop, budgeting is essential to identify where there may be cash flow issues and to aid decision-making about whether there needs to be bigger changes to put the business on a more sustainable financial footing.
Farms are advised to explore further diversification opportunities and also take advantage of any government grants while they are available.
Although schemes like the Sustainable Farming Incentive (SFI) are not a replacement for Basic Payments, it does offer a useful opportunity to de-risk some farming income.
Strategic business planning is often considered hand-in-hand with succession planning: it is an ideal moment in a business lifecycle to consider some more difficult long-term decisions.
These could include changing management practices, reviewing the enterprise mix, collaboration, Joint Ventures, Contract Farming Agreements or even the sale or lease of assets.
Seeking input from an independent source – whether a trusted advisor, friend or neighbour – can be incredibly valuable during this journey.
They can offer a fresh perspective, raise questions you might not have thought about and suggest new possibilities which you may not have yet considered.
Climate change adaptation
The impact of climate change is becoming increasingly evident on farms and while we cannot control the weather it is possible to plan to reduce exposure – both physically and financially – to more erratic weather patterns.
Most farms have already responded to the impact of climate change in one way or another, but a more strategic approach to improving climate resilience can enable the risks to be managed more effectively.
Strategies may include a focus on protecting and enhancing soil health; aiming for greater diversity in cropping; ensuring the infrastructure is in place to be able to cope with very wet or very dry conditions and adapting machinery policy so you have access to the right machinery at the right time.
Taking proactive steps should help to secure long-term productivity, reduce your emissions and ensure farms are well-placed to thrive in a changing climate.
Land use strategy direction
Recent years have seen growing tensions over the competing demands for land, particularly in relation to food security, energy production and the environment, exacerbated by a lack of an overarching policy on land use.
In 2023, the Conservative government promised a Land Use Framework to address these issues and help guide decision making.
The current government has decided this is something it is taking forward with the long-awaited document now expected early in the new year.
Done well it may help to improve confidence among land managers about the way forward.
Ensure residential property fit for the future
Demand continues to outstrip supply for residential rental properties on farms and can be an important income stream.
However, landlords need to be ready for upcoming legislation focused on improving energy efficiency in rural housing and giving tenants greater rights.
Landlords in England must ensure their properties have an EPC rating of at least C by 2030 which may be practically difficult and expensive for those with traditional cottages or listed buildings.
Tough decisions may need to be made about whether it is possible to invest to future proof such properties or whether it is better to sell.
The government is also pushing forward with the Renters’ Rights Bill which aims to ban no-fault evictions (Section 21 notices) and increase tenants’ rights and protections, while still allowing the property to be reclaimed by the landlord under certain circumstances.
Inspiring leadership more important than ever
Investing in leadership skills, staff management, and personal development may prove to be the best investment you can make in 2025.
Research consistently highlights that management is often the key determinant of a farm’s financial success, explaining why some farms are consistently in the top 25% - despite many not being particularly large or without the best soils.
In today’s challenging environment, taking care of your team has become more critical than ever.
The industry has faced a long-standing skilled labour shortage, which has now reached such an acute level that some farmers are choosing to streamline their operations rather than struggle to recruit.
By building strong leadership and improving workforce management, farmers can take practical steps to address these challenges and keep their businesses running smoothly.
