English farmland has seen the steepest fall in its value since the financial crisis, as investors fret about the possibility of a loss of subsidies in the event of a Brexit.
Values fell by 3 per cent in the three months to March in an index by Knight Frank, the estate agent, the largest quarterly drop since the end of 2008, ending a bull run of spectacular returns on farmland.
Average values have risen nearly 180 per cent in the past decade, Knight Frank added. But in the current climate of political uncertainty ahead of June’s referendum on Britain’s place in the EU the number of transactions also appears to be falling.
British farmers receive annually €3.1bn in direct support from the EU’s Common Agricultural Policy (CAP) scheme, without which many fear going out of business given the current low prices for milk, wheat, pork and other agricultural commodities.
With no one but the UK Independence party so far sketching out an alternative to CAP if Britain leaves the EU, roughly two-thirds of farmers would vote against an exit, according to the National Farmers Union.
Andrew Shirley, head of rural research at Knight Frank, said it was reasonable to assume farmland will fall 8 per cent in value in 2016 “on the assumption that commodity prices remain low and the worst-case scenarios of a sterling collapse do not come to pass.”
The crucial role of EU subsidies in propping up profitability at many UK farms lies behind much of the disquiet. “There is a lot of uncertainty about where subsidy payments would go in event of Brexit,” said Mr Shirley. “That makes your sums harder to add up if you’re thinking about buying land.”
Farmers week;y, which tracks the acreage of land advertised for sale in its pages, noted a 24 per cent drop in the three months from January compared to the same period last year, falling to 11,029 acres.