The tenant farming sector has settled at an 'unnatural equilibrium' due in part to the 'stifling effect' of area-based entitlements and subsidies.
This is according to the Central Association of Agricultural Valuers (CAAV), which warns that the agricultural letting market is in 'stasis'.
Its annual survey found the overall let area has remained still since 2003, when the EU's CAP area payments were starting to come in.
However, current changes in farming policy are likely to have an impact in the coming years, CAAV warns.
Uncertainty will typically lead to shorter-term lets and confidence to longer-term ones, says Jeremy Moody, secretary and adviser to the body.
“The let land market has appeared to have settled at an unnatural equilibrium, due in part to the stifling effect of area-based entitlements and subsidies,” he says.
“Whether de-linking changes this is a matter for future surveys. In all of the UK, the tenanted sector will only grow if owners who do not want to farm themselves see letting land as an attractive option.”
Its survey found that in England and Wales, fresh lets were marginally outweighed by losses, resulting in a net loss of 1,532 acres of let land.
Around two-thirds of 1986 Agricultural Holdings Act tenancies, representing 68.6% of the let land area, were re-let on Farm Business Tenancies for an average of 7.26 years.
The vast majority of lettings were of bare land – only 6.6% were fully equipped farms.
The average length of agreement increased with area and equipment; holdings with a house and buildings let for an average of nearly 10 years, while the overall average was 3.84 years.
However this includes everything from seasonal grass lets upwards, so where lettings of a year or less are excluded the average term was 5.42 years.
New entrants obtained 20% of lettings where occupation changed, and tended to be offered longer tenancies, with 35.6% of them being for a term of more than five years.
Overall, the 2023 survey by CAAV suggests some increase in activity in England and Wales, though not to the levels seen before 2005.
In Scotland, the area and number of units changing hands continued to decline, to just 42 units covering 8,695 acres. That is down from 130 units covering 34,657 acres in 2020.
Mr Moody says: “Bare land lettings are now predominant in Scotland; only three of the 27 new lettings included a house, while five of the tenancies that ended and were not relet included a house."
Overall there was a net loss of 5,083 acres in Scotland, year-on-year. “With very little new land attracted to the sector, there is much more risk of further decline than opportunity for growth.
"With the political risks seen in letting in Scotland, it could appear to be more closely resembling Ireland as a country of short-term non-tenancy arrangements,” he warns.
As the Irish government has argued, access to land is a key constraint on raising productivity.
In the absence of a flexible tenancy framework, the result is a bias towards very short-term permissions, to the general detriment of the agricultural and environmental quality of the land and the performance of the businesses farming it
With the stasis in land occupation, the CAAV says it is actively looking at ways to remedy this, and is working with government tenancy groups in each of the four nations.
“Increasing the use and flexibility of our land occupation markets seems a critical reform for the future commercial success of agriculture,” says Mr Moody.
“In that task, the Republic of Ireland’s Income Tax relief for letting farmland for more than five years is showing strong and continuing signs of success in attracting retiring farmers to let out their land.
"That merits serious attention in the UK," he concludes.
