Brave new farms
The British farm evokes idyllic images of gentle pastures, hedgerows and wheat fields – but not often robots. But that could all be set to change. Farmers are increasingly turning to technology to improve efficiency and precision, with drones and robots deployed to distribute fertiliser, monitor production and identify parasites along with driverless tractors working fields.
The aim of these new methods is to improve competitiveness and profitability in the face of increasing market pressures – issues that have come into sharper focus following the UK’s vote to leave the European Union. So how is the UK agricultural sector responding? And what are the implications for land use and real estate – both in rural and urban areas?
The UK’s agricultural sector has benefitted for decades from subsidies and various other forms of state intervention, including import tariffs, which have largely insulated it from foreign competition. But with Brexit on the horizon, the sector could be facing unprecedented change, as the UK government faces the choice of recreating a system of subsidy and support that many farmers have come to rely upon, or starting afresh.
Environment secretary Michael Gove has said the government will guarantee subsidies at the current EU level until the 2022 election but going forward, it wants to steer the way for a new system that focuses on conservation and the environment, with farmers being seen as 'stewards of the countryside' and subsidies channelled to those who ‘enhance the natural environment’, such as planting woodland or creating new wildlife habitats.
"Although details of the new regime remain sketchy, many in the sector now expect huge cuts in subsidies – with the result being much greater pressure on farmers to drive up profitability," says Rebecca Cox, Real Estate Senior Associate in Trowers & Hamlins' Exeter office. "We have seen something of a sea change in sentiment in the farming sector in recent months," she explains.
"Following the Brexit vote, the agricultural sector enjoyed something of a honeymoon. The fall in the pound meant payments in Euros were worth more and because the vast majority of UK farming exports go to the European Union, many farmers actually did very well. So the sector was actually benefitting and perhaps this stopped it from confronting the reality of Brexit. But now the focus is very much on the future and people are worried. They are starting to wake up to the likelihood that the subsidy and system of support is going to change dramatically."
This means issues around the profitability and competiveness of the sector are more pressing than ever. "We are working very closely with farmers on business transformation – that is the big issue now – and how they can improve efficiency through technology and diversify their business," says Cox.
This includes advising on the change in use of land and buildings through the planning system to help farmers get more value out of their holdings, as well as land disposals and more general consulting on business transformation. Nicola Janus-Harris, Real Estate Senior Associate in Trowers & Hamlins’ Exeter office says, "It’s important to be positive – to look at the businesses and sectors that have been thriving without subsidy and to learn from them."
"The focus is on efficiency of land use and much greater precision through technology and automation."
The National Planning Policy Framework contains broad support for the planning system to support a prosperous rural economy. This extends to promoting the development and diversification of agricultural and other land-based rural businesses, and supporting sustainable rural tourism and leisure developments to the benefit of businesses, communities and visitors whilst respecting the character of the countryside. "Diversification is something that national policy encourages, but demonstrating how new ventures complement existing rural businesses rather than detract or threaten them is the key to success" says Rory Stracey, Real Estate Senior Associate and Planning Specialist at Trowers & Hamlins' Exeter office.
But Brexit is not the only driver of change. The revolution in shopping, driven by online retail and the demand for next day or same day delivery is creating its own pressures. As Big Four supermarket retailers have found, the digital revolution has transformed shopping habits, with consumers eschewing the weekly shop at large supermarkets in favour of more regular visits to smaller stores, closer to home, combined with home delivery. In urban centres, a shift in eating habits in favour of locally sourced food, organic products, and less meat, is driving the rise of farmers markets, and independent shops, again at the expense of large supermarkets.
"This all means there are much greater pressures on the old logistics and distribution model that has served farms for decades – it’s now all about quality, speed and efficiency and meeting the needs of more discerning consumers," says Cox.
"Distribution centres are becoming smaller and more urban and new players, like Amazon Fresh, will take that to the next level."
One solution could be to bring the farm to the city. In Asia and the US, especially, urban farmers are utilising advanced technology to produce high yielding farms in small urban warehouse environments. And the UK is beginning to follow suit. In Beckton, south London, for example, GrowUp has developed the UK’s largest aquaponics farm, combining farming fish with hydroponics, where the vegetables are fed using waste water from the fish. The farm produces fresh water fish and a range of greens, including pea shoots, baby kale, watercress, and radish, for the London restaurant and food retail market. Clients include Wholefoods and FarmDrop.
"There will be a growing market for this kind of intensive high tech urban agriculture – and that will put fresh pressure on already in demand warehouse and logistics space," says Janus-Harris. "Urban farming will not replace rural farms, but as technology continues to advance, we will see more agriculture in urban centres."
The UK farming sector is facing real pressures and how businesses respond over the next few years will be critical. As in many other sectors, technology can provide solutions, but some farmers have been slow to adapt. Brexit may yet prove to be the wakeup call that accelerates the sector’s transformation.