In June 2025, GrainGrowers travelled to the United Kingdom (UK) to engage with farmers, industry bodies, and policy stakeholders. The visit offered timely insights into the significant structural changes reshaping UK agriculture. With the UK farming system navigating the combined pressures of domestic policy reform, shifting global trade dynamics, and escalating climate risks, the sector stands at a pivotal moment. These developments provide valuable lessons for Australia as it charts the future of its own agricultural systems.
Key Challenges Facing UK Grain Production
1) Inheritance Tax Reform Creating Succession Pressures
Planned changes to the UK’s inheritance tax regime are generating significant uncertainty for family farming businesses.
Historically, farmland in the UK has been exempt from inheritance tax under the Agricultural Property Relief (APR). However, from April 2026, this relief will be capped for agricultural assets over £1 million. Any agricultural assets above this threshold will be taxed at a rate of 20%. Although this is lower than the standard 40% inheritance tax rate, the reform has raised alarm among farmers, resulting in large protests earlier this year.
Many of the farmers and stakeholders the GrainGrowers group met during the trip expressed deep concern about the potential consequences of the planned changes, fearing that the reforms could force them to sell their businesses.
Without adjustments, the proposed reforms threaten to make it increasingly difficult for farming families to manage intergenerational transfer without structural adjustment, with some farm businesses exiting the sector, resulting in fewer farmers.
2) Transition from Direct Subsidies Driving Uncertainty and Diversification
Similarly, another key shift facing British agriculture is the phase-out of direct land-based subsidies following the UK’s departure from the European Union (EU).
For decades, the UK participated in the EU’s Common Agricultural Policy (CAP), receiving approximately £4.7 billion annually, with roughly 80% delivered as direct payments under the Basic Payment Scheme (BPS), primarily based on land area farmed.
During this period, farmers were highly reliant on subsidies, making up 57% of the total profit on average-sized farms and 78% of total profit for small farms.
In the post-Brexit landscape, the Agriculture Act 2020 established a new legislative framework for agricultural support, marking the beginning of a seven-year Agricultural Transition period (2021–2027). Under this transition, CAP-style direct payments are being phased out, and support is being shifted towards payments for public good activities, such as biodiversity, soil health, and animal welfare improvements, with the Sustainable Farming Initiative the flagship program under the new framework. However, in March this year, the government abruptly announced that it would be closing the scheme for applications.
While the government has committed to maintaining the overall agricultural budget, the evolving funding model has created uncertainty and adjustment pressures for UK farmers.
National Farmers Union President Tony Brayshaw described the pause in applications as “another shattering blow to English farms, delivered yet again with no warning, no understanding of the industry, and a complete lack of compassion or care.”
As a result, farmers are increasingly seeking to diversify income streams. According to Department for Environment Food and Rural Affairs (Defra) 71% of farm businesses in England had some diversified activity in 2023/24 with the leasing out of buildings for non-farming purposes identified as the most popular form of diversification in England.
While some farmers are finding creative ways to adapt, it is clear that many are still navigating the uncertainties of a rapidly changing policy landscape.
3) Increasing trade liberalisation
Many of the stakeholders GrainGrowers met with during the trip expressed concern about the recently signed Economic Prosperity Deal (EPD) between the UK and the United States (US).
In the post-Brexit era, the United Kingdom has assumed full responsibility for negotiating its own trade agreements for the first time in several decades.
Previously, as an EU member state, the UK was subject to EU customs legislation, including the EU’s common external tariff. Since the UK left the EU, however, it has set its own tariffs under the Taxation (Cross-border Trade) Act 2018 and has an average tariff of 9.2% on agricultural goods.
While this shift provides opportunities to forge independent partnerships, it has also exposed the UK’s agriculture industry to new competitive pressures.
Among its provisions, the deal with the US includes the removal of the 19% tariff on US ethanol imports, replaced by a duty-free tariff rate quota (TRQ) of 1.4 billion litres annually.
Currently, around 9% of the UK’s wheat production is used for ethanol manufacturing and there were concerns the deal threatened the viability of UK ethanol production and, by extension, one of the few domestic value-adding pathways for British grain.
4) Competing Land Use Pressures
Increasing competition from higher-value agricultural sectors and non-farming uses is placing growing pressure on grain production across the United Kingdom.
For instance, in Kent, the rise of high-value horticultural enterprises such as berry production has led to the increasing displacement of broadacre cropping in the region. These operations offer stronger margins and can justify higher land rents, making it difficult for grain farms to compete. One farmer GrainGrowers met with acknowledged he had lost several land rentals because he could not compete with the high prices offered by berry production.
This trend is occurring against a backdrop of broader land use shifts. Agricultural land is increasingly being repurposed for non-farming uses, including renewable energy infrastructure, biodiversity offsetting, and rural residential development. According to Defra, approximately half of England’s total agricultural output was produced on just 30% of the farmed area, leading to calls for lower-productivity land to be used for alternative policy objectives. For example, earlier this year, the UK Government released a draft Land Use Framework for consultation, proposing that 9% of the nation’s agricultural land (equivalent to 760,000 hectares) be rededicated to delivering environmental or climate benefits.
For UK grain growers, the cumulative effect of these pressures is a shrinking footprint in the national land use equation.
5) Climate Change Reshaping UK Grain Production
The UK grain industry is increasingly exposed to the impacts of a changing climate. Once considered a relatively stable production environment, the sector now faces escalating challenges from extreme weather events and shifting seasonal patterns. In its December 2024 update, Defra acknowledged that “weather conditions in recent years have been some of the most extreme on record and have affected domestic food production.”
In 2022, the UK experienced its first recorded temperatures above 40°C, resulting in widespread crop stress, a 21% increase in farm fires, and harvest delays. More recently, between October 2023 and March 2024, parts of the country saw monthly rainfall totals more than double the 1991–2020 averages. This heavy rainfall led to extensive soil erosion, flooding, and crop damage, which Defra described as “devastating and long-term.”
These events reflect a broader climate trend. Between 1991 and 2020, the UK’s average temperature rose by over 0.9°C compared to 1961–1990, and annual rainfall increased by 7.3%. While the UK still produces more grain than it consumes, year-to-year yield variability is increasing due to climate volatility.
Throughout the trip, many farmers apologised for the heat-stressed state of their crops. To Australian visitors, the paddocks still looked relatively healthy, but UK growers emphasised that even modest yield reductions carry significant financial consequences, especially given the smaller average farm size.
These shifting conditions are already driving changes in production decisions. For example, some farmers are trialling alternative crops better suited to a warming climate, while others are modifying planting windows to accommodate more volatile seasonal patterns. The growing season itself is lengthening in some regions, which may create new opportunities. For example, the expansion of vineyards has been cited as a climate-linked growth area. However, such opportunities are not evenly distributed, and hotter, drier summers combined with wetter, warmer winters could prove detrimental to staple crops like winter wheat.
Key Lessons for Australia
- Support intergenerational farming through stable tax and succession policy
The long-term viability of family-owned farms depends on consistent, well-designed frameworks for inheritance, taxation, and superannuation. Any policy changes in these areas must be carefully assessed for their potential impact on farm continuity and the broader rural economy. - Policy stability is essential for agricultural confidence and investment
Uncertainty around government programs, sustainability standards, or support schemes can undermine planning and investment decisions. Predictable, transparent policy settings are critical to maintaining productivity and enabling industry adaptation in a changing climate. - Safeguard emerging low carbon liquid fuel in trade negotiations
Trade agreements must not undermine Australia’s ability to develop a domestic low-carbon liquid fuel industry. Ensuring policy certainty to support emerging local feedstock production and biofuel refining is essential for both climate goals, regional development and fuel security. - Protect Australia’s most productive agricultural land
With growing competition for land from urban expansion, energy infrastructure, and other high-value land uses, Australia must remain vigilant in protecting agricultural production. Clear land-use planning and strong policy safeguards are needed to maintain food and fibre production into the future.
Conclusion
UK agriculture is navigating the combined impacts of succession pressures, climate volatility, policy upheaval, and intensifying trade competition. For Australian growers, the experience of UK farmers offers both cautionary tales and valuable foresight. As Australia confronts its own structural shifts, from decarbonisation and succession planning to urban encroachment and global market disruptions, the UK’s experience underscores the risks of poorly timed reforms and instability. GrainGrowers’ visit has reinforced the need for Australian agricultural policy to remain adaptive and internationally aware. By learning from others and acting early, GrainGrowers can better safeguard the profitability and sustainability of Australia's grain industry.
Authored by Annabel Mactier, Policy Manager Trade and Supply Chains