LAST MONTH’S election of a UK Government with a strong Conservative majority offers some 'much needed certainty' in the farm business environment – even if a great deal of regulatory change still faces the sector over the coming five years.

Commenting on the latest Savills Farmland Forecast, the firm's UK head of rural agency, Charles Dudgeon, said: “Our rural research team has identified the major influences which could drive three market scenarios over the next five years; an appreciating market, the status quo and a depreciating market.

“The election of a Conservative government signals a move to freer trade and higher environmental protectionism, but with budgets protected for the duration of the next parliament, landowners and occupiers may take additional comfort that policy evolution will be gradual rather than sudden," said Mr Dudgeon.

“The rural economy is more likely to perform positively in the five years ahead, at least once the first Brexit hurdle is passed, and we expect the capital appreciation scenario to prevail, with local factors remaining the predominant influence on land values.”

Savills head of rural agency in Scotland Evelyn Channing believes a potential question mark remains north of the border, but said: “Whilst Scottish rural assets remain attractive globally, an increased domestic independence agenda should not adversely impact on the performance of the Scottish rural economy. However, a prolonged period of uncertainty and conflict is likely to continue to weigh on sentiment.

“With uncertainty expected to ease over the short to medium term, landowners will be reassessing options. The likely restructuring of agricultural payments is expected to put pressure on returns from farming and force the hand of some who are unable to invest or restructure," she predicted. "This is expected to bring a variety of land types to market. The prevailing low cost of funds and a volatile global trade market may also attract a greater number of buyers providing other investment objectives are met.

“The current volatility of the pound also boosts this sentiment. In all situations, upside potential is predicted to be greater than any downturn, largely due to environmentally oriented demand for land use underpinning the lower end of the market.”

Looking at the Scottish farmland market in detail, Luke French of the Scottish agency team said: “2019 was another year of restricted supply of acres in both Scotland and unusually the wider UK market – acres offered for sale in the first six months of the year hit a low not been seen since the foot-and-mouth crisis of 2001.

“However despite this, we saw some encouraging trends last year which we anticipate will continue in 2020: 197 new buyers registered with us from far and wide, which has broadened the market for farms of all shapes and sizes. Average forestry planting land values grew by 120% over a decade to £2600 per gross acre and 75% of our farm sales in 2019 went under offer following competitive bidding situations.

“It is clear that a conundrum exists whereby farm purchasers want to enact their expansion plans almost irrespective of Brexit, while sellers seem to find it hard to believe there is actually an active market.”