UK Farming Subsidies After Brexit: How the Shift from CAP to ELMS is Reshaping British Agriculture

British farming is in the midst of its most profound transformation in half a century. The UK's departure from the European Union's Common Agricultural Policy (CAP) and the shift to a new subsidy system based on environmental outcomes rather than land ownership represents a radical experiment in agricultural policy. For some, it is an opportunity to rewild the countryside, tackle climate change, and create a more sustainable food system. For others, it is an existential threat to family farms, food security, and rural communities.

The stakes are enormous. UK farmers received £3.5 billion per year in CAP direct payments, money that kept many farms afloat and underpinned the rural economy. Those payments are being phased out entirely by 2027, replaced by Environmental Land Management Schemes (ELMS) that pay farmers for planting hedgerows, restoring peatlands, reducing carbon emissions, and creating habitats for wildlife—not for producing food.

The transition is messy, underfunded, and deeply uncertain. Many farmers cannot yet access the new schemes. Others find the payments insufficient to replace lost CAP income. The result is a wave of farm exits, declining food production, and a growing debate about whether the UK is abandoning its farmers in pursuit of environmental goals that may be unrealistic or unaffordable.

What was the Common Agricultural Policy?

The Common Agricultural Policy (CAP) was the EU's farm subsidy system, established in 1962 to ensure food security after the devastation of World War II. It paid farmers based on the amount of land they owned or farmed, regardless of what they produced, how efficiently they farmed, or whether they protected the environment.

By the 2010s, CAP consumed €55 billion per year, nearly 40% of the entire EU budget. The UK received approximately £3.5 billion annually, distributed as direct payments to around 87,000 farm holdings. The average payment was £24,000 per farm, though the distribution was highly unequal: the largest 10% of recipients received 50% of the money, with some estates and agribusinesses collecting millions.

CAP was widely criticized as inefficient and regressive. It rewarded landowners for owning land, not for producing food or managing the countryside well. Environmental groups argued it incentivized intensive farming that damaged biodiversity, polluted waterways, and contributed to climate change. Economists pointed out that it inflated land prices, making it harder for new farmers to enter the industry, and that it distorted markets by subsidizing overproduction.

Brexit gave the UK the opportunity—and the obligation—to design a new system.

The new system: Environmental Land Management Schemes (ELMS)

The UK government's replacement for CAP is Environmental Land Management Schemes (ELMS), a suite of programs that pay farmers for delivering environmental benefits rather than simply owning land. ELMS has three tiers:

1. Sustainable Farming Incentive (SFI) — pays farmers for basic environmental actions like improving soil health, managing hedgerows, and reducing pesticide use. Payments range from £22 to £640 per hectare depending on the action. SFI is designed to be accessible to most farmers and compatible with food production.

2. Countryside Stewardship (CS) — pays for more ambitious environmental work, such as creating wildlife habitats, restoring wetlands, and planting trees. Payments are higher but require multi-year agreements and more complex management.

3. Landscape Recovery (LR) — funds large-scale, long-term projects (20+ years) to restore entire landscapes, such as rewilding estates, peatland restoration, or river catchment management. This is aimed at major landowners and environmental organizations, not typical working farms.

The government has pledged to maintain the £2.4 billion annual agriculture budget (reduced from £3.5 billion under CAP due to the removal of the largest landowner payments). However, the money is being redirected: direct payments based on land area are being cut by 50% by 2024 and eliminated entirely by 2027, with the savings used to fund ELMS and other programs like grants for farm productivity and innovation.

The theory is elegant: instead of paying farmers to own land, pay them to deliver public goods—clean water, carbon storage, biodiversity, flood prevention—that the market does not reward but society values. Farmers who embrace environmental land management can earn as much or more than under CAP. Those who focus solely on food production will need to become more efficient and competitive without subsidies.

The reality is far messier.

The transition crisis: farmers caught in the gap

The transition from CAP to ELMS is happening too fast for many farmers. CAP payments are being cut rapidly, but ELMS schemes are not yet fully operational, are difficult to access, or do not provide enough income to replace lost subsidies.

The numbers are stark:

• CAP direct payments have been reduced by 50% since 2021 and will reach zero by 2027.
• As of March 2024, only 35,000 farmers (40% of eligible farms) are enrolled in SFI, the most accessible ELMS scheme.
• The National Farmers' Union (NFU) estimates that 35% of farms are experiencing a net loss of income during the transition, as CAP cuts outpace ELMS enrollment.
• 42% of farms under 50 hectares report they may not survive the transition without additional income from off-farm work or land sales.

The reasons for low ELMS uptake are multiple:

Complexity. ELMS applications require detailed land management plans, environmental assessments, and multi-year commitments. Many farmers, especially older or part-time farmers, find the process overwhelming and the guidance unclear.

Ineligibility. Some farmers do not have land suitable for ELMS. Intensive arable farms, for example, may have few hedgerows, wetlands, or habitats to restore. Tenant farmers (who farm 30% of UK agricultural land) often cannot make long-term commitments required by ELMS because they do not own the land and their tenancies may be insecure.

Insufficient payments. ELMS payments are often lower than the CAP income they replace, especially for productive farmland. A farmer who received £30,000 in CAP payments may only be able to access £18,000 in SFI payments, forcing them to cut costs, reduce production, or find alternative income.

Delayed rollout. Many ELMS options were not available until 2023 or 2024, leaving farmers in limbo. Landscape Recovery, the highest-paying tier, is still in pilot phase and available to only a handful of projects.

The result is a cash flow crisis for many farms. Farmers are cutting investment, reducing livestock numbers, and deferring maintenance. Some are selling land or exiting the industry entirely. The Tenant Farmers Association reports that 15% of tenant farmers are considering leaving farming in the next five years, the highest rate in decades.

The impact on food production

The shift from subsidizing food production to subsidizing environmental outcomes is having a measurable impact on UK agriculture. Food production has declined 6% since 2020, according to DEFRA data published in January 2024. Key trends include:

• Livestock numbers falling. Beef cattle numbers are down 8%, sheep down 5%. Farmers are reducing herds to cut costs and because environmental schemes often require lower stocking densities.
• Land taken out of production. Approximately 120,000 hectares of farmland have been converted to environmental schemes, tree planting, or rewilding since 2020, reducing the area available for crops and livestock.
• Farm exits. The number of active farm holdings has declined by 3% since 2020, with the steepest falls among small and medium-sized family farms.

The government argues this is not a crisis but a necessary adjustment. UK agriculture is relatively inefficient by global standards, and the country imports 48% of its food (by value). The strategy is to focus domestic production on high-value products (e.g., organic, grass-fed, specialty crops) and environmental services, while importing commodities like wheat, soy, and fruit more cheaply from abroad.

However, the Ukraine war and global supply chain disruptions have exposed the risks of this approach. Wheat prices spiked 50% in 2022 when Russian and Ukrainian exports were disrupted. Fertilizer and energy costs soared. The UK's dependence on food imports made it vulnerable to global shocks in a way that countries with stronger domestic production (e.g., France, Poland) were not.

Food security advocates warn that reducing UK food production in an unstable world is reckless. The National Food Strategy, commissioned by the government and published in 2021, recommended that the UK maintain at least 60% food self-sufficiency and increase production of fruits, vegetables, and sustainable protein. Current policy is moving in the opposite direction.

Who wins and who loses?

The shift to ELMS creates clear winners and losers.

Winners:

• Large landowners with marginal land. Estates with uplands, moorland, or wetlands can earn significant income from Landscape Recovery and Countryside Stewardship by rewilding or restoring habitats, often more than they earned from low-productivity grazing.
• Environmental NGOs and rewilding advocates. Organizations like the National Trust, Wildlife Trusts, and Rewilding Britain are accessing ELMS funding to restore nature on a large scale.
• Innovative farmers. Those who adopt regenerative agriculture, agroforestry, or diversified systems can stack ELMS payments with income from high-value food products and eco-tourism.

Losers:

• Small and tenant farmers. Those with little land, insecure tenancies, or intensive production systems struggle to access ELMS and cannot replace lost CAP income.
• Livestock farmers in productive areas. Farmers on good-quality grassland or arable land earn less from ELMS than from CAP, as environmental payments are lower for productive land.
• Young and new entrants. Rising land prices (driven partly by demand for land for environmental schemes and carbon offsetting) and reduced farm incomes make it harder to enter the industry.

The Tenant Farmers Association has been particularly vocal, arguing that ELMS is designed for landowners, not working farmers. Tenant farmers often cannot commit to long-term environmental schemes because their tenancies are short or insecure, and landlords may prefer to take land back for rewilding or carbon projects that generate income without the hassle of tenants.

The political and economic context

The shift to ELMS is not just about agriculture; it is part of a broader political and economic project.

Environmentally, the UK has committed to net zero emissions by 2050 and to halt biodiversity decline by 2030. Agriculture is responsible for 10% of UK greenhouse gas emissions (mostly methane from livestock and nitrous oxide from fertilizers) and is a major driver of habitat loss and water pollution. ELMS is a key tool for meeting these targets.

Economically, the government sees ELMS as a way to reduce public spending on agriculture (by cutting the largest CAP payments to wealthy landowners) while delivering better value for money through targeted environmental outcomes. The savings are being redirected to productivity grants, innovation funding, and environmental schemes that benefit society, not just landowners.

Politically, ELMS reflects a post-Brexit vision of British agriculture as high-quality, sustainable, and environmentally responsible, rather than competing on volume and price with industrial agriculture in the EU, US, or South America. The government argues this aligns with consumer demand for local, organic, and ethical food.

However, this vision is contested. The NFU argues that food production should be the priority and that environmental goals should not come at the expense of farm viability or food security. Rural communities fear that the decline of farming will lead to depopulation, loss of rural services, and the erosion of cultural landscapes shaped by centuries of agriculture.

International comparisons

The UK is not alone in reforming farm subsidies, but its approach is more radical than most.

The EU is also reforming CAP to link payments to environmental outcomes, but the changes are slower and less dramatic. Direct payments continue, and farmers have more time to adapt.

New Zealand abolished farm subsidies entirely in the 1980s, forcing farmers to compete without state support. The result was a painful transition, with many farms going bankrupt, but the sector eventually became more efficient and export-focused. However, New Zealand has a much smaller population, abundant land, and a focus on pastoral farming, making it a poor comparison for the UK.

Switzerland pays farmers generous subsidies for environmental and cultural services (e.g., maintaining alpine pastures, traditional farming practices), but also protects domestic agriculture with high tariffs and import controls. The UK is doing the opposite: opening markets to imports while cutting support for domestic production.

The UK's approach is a high-risk experiment. If it works, it could demonstrate that agriculture can be profitable, sustainable, and environmentally restorative without subsidizing land ownership. If it fails, it could lead to a collapse of domestic food production, rural depopulation, and increased reliance on imports from countries with lower environmental and welfare standards.

What needs to happen

For the transition to succeed, several things must change:

First, ELMS must be simplified and made accessible. The current system is too complex, bureaucratic, and slow. Farmers need clear guidance, fast payments, and schemes that work for working farms, not just large estates.

Second, payments must be adequate. ELMS income must be sufficient to replace lost CAP payments and cover the costs of environmental management. Otherwise, farmers will exit the industry or revert to intensive practices.

Third, tenant farmers must be protected. ELMS must be redesigned to work for tenant farmers, with shorter agreement periods, landlord incentives to support tenants, and protections against eviction for environmental land use.

Fourth, food production must be valued. The government must recognize that environmental goals and food security are not mutually exclusive. Policies should support farmers who produce food sustainably, not force them to choose between production and environmental payments.

Fifth, the transition must be slower. The pace of CAP cuts is too fast for many farmers to adapt. Extending the transition period to 2030 would give farmers more time to enroll in ELMS, adjust business models, and access support.

The bottom line

The UK's shift from CAP to ELMS is the most significant change to farm subsidies in 50 years. It represents a bold attempt to align agriculture with environmental goals, reduce public spending on landowners, and create a more sustainable food system. However, the transition is chaotic, underfunded, and deeply uncertain.

Direct CAP payments are being phased out by 2027, but many farmers cannot yet access replacement ELMS income. The average farm received £24,000 per year in CAP payments, and 35% of farms are experiencing net income losses during the transition. Small and tenant farmers are the hardest hit, with 42% of farms under 50 hectares reporting they may not survive.

Food production has declined 6% since 2020 as farmers reduce livestock, convert land to environmental schemes, or leave the industry. This raises serious questions about food security, rural communities, and whether the UK can achieve environmental goals without sacrificing the viability of working farms.

The success of ELMS will depend on whether the government can simplify the schemes, increase payments, support tenant farmers, and balance environmental ambition with the need for a productive, resilient agricultural sector. The world is watching this experiment. British farmers are living it.