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Basic Payment Scheme Support

The phasing out of the Basic Payment Scheme is likely to be a concern for many farmers. AMC can provide help and support when it comes to restructuring your business’s finances to bring income and outgoings back into a more comfortable balance.

From this year, the Basic Payment Scheme (BPS) will be gradually phased out in England, with the sum farmers receive reducing each year, depending on the size of their land-holding, before being removed completely by 2028.

The scheme will be replaced by the Environmental Land Management Scheme (ELMS), which will incentivise sustainability and the delivery of public goods in return for payments made.

With a pilot to be carried-out between 2021 and 2024 and a full rollout not planned until 2024, by which time BPS payments will have reduced by between 50-70%, many farmers are understandably concerned about facing a fall in income over the coming few years. A recent NFU Confidence survey found that 78% of farmers believe the withdrawal of BPS will have a negative impact on their business.

“While we know that the intention of ELMS will be to encourage farmers to achieve certain targeted outcomes, with a pilot scheme yet to be undertaken, we are currently short on detail regarding how the final scheme will look,” says Andrew Connah, Regional Agricultural Manager, AMC. “What many farmers fear however is the net subsidy income from ELMS being lower than the current support from BPS, as there are likely to lose revenue streams and/or incur costs in order to meet the targeted outcomes of the scheme.”

So, what steps can farmers take to redress an anticipated reduction in income over the coming years?

How AMC can help

“If you feel that you are likely to see subsidy income reduce, then one obvious way to address this would be to look for alternative income streams to replace this” says Andrew. “For some farmers that might mean becoming more intensive while others may consider diversifying to generate an alternative income stream.

“Where neither is feasible, another option may be to restructure your business finances to ensure that future development is not hindered by a restricted cash flow and this is where AMC’s unique product range can really help.”

Some of the benefits of AMC’s unique offering include:

Longer-term loans of up to 30 years

  • Easing your cash flow by spreading repayments over the longer term.
  • Restructure existing loans over an increased time period to redress any income/outgoings imbalances.
  • No penalties for early repayments on variable rate loans, so you still have the flexibility to make payments over the shorter term if possible.

Fixed rates for 30 years

  • Have peace of mind that outgoings will remain at an affordable level.
  • Lock in current low interest rates for the long term.

Interest only loans

  • Offers a potential solution for time-specific opportunities i.e. buying neighbouring land, while still servicing existing debt.
  • Existing borrowing can potentially be restructured to interest only.
  • Terms available for up to 30 years.

A commitment for the whole term of the loan

  • With no periodic reviews of the decision to lend or loan terms – we remain committed for the full term of the loan, as long as repayment commitments are being fully met.
  • Can help farmers futureproof against income shifts as a result of BPS changes.

Providing certainty in uncertain times

“With many farmers facing a period of uncertainty, an AMC loan can offer both the benefits of improved cash flow, and assurance that the loan won't be called in, so long as the loan repayments are met,” says Andrew.

“It’s not just the changes to BPS farmers have to contend with. All this is happening against a backdrop of Brexit and the uncertainties of a post-Covid economy, all of which will bring their own challenges. As a specialist lender to agriculture, our focus is on providing farmers with as much certainty as possible in such unsettling times.”

Act now

With an uncertain few years ahead, we are urging farmers to take steps now to future-proof their businesses.

“Farmers should give themselves as much flexibility as possible,” says Andrew. “Now is the time to be thinking about potential challenges ahead and addressing them while your accounts reflect a good position.”

To discuss how AMC can help you to prepare for the phasing out of BPS, call our new lending enquiries team today on 02077 143600.

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AMC loans available for business purposes only, provided on a secured loan basis. Minimum AMC standard loan £25,001. To meet customer requirements, lending criteria will vary. Lending is subject to status.

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The Agricultural Mortgage Corporation plc, registered in England & Wales, no. 234742. Registered office: Keens House, Anton Mill Road, Andover, Hampshire, SP10 2NQ. Telephone: 02077 143660.

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The Agricultural Mortgage Corporation plc is a wholly owned subsidiary of Lloyds Bank plc. Lloyds Bank plc is a member of Lloyds Banking Group. Lloyds Banking Group is a financial services group that incorporates a number of brands including Lloyds Bank. More information on Lloyds Banking Group can be found at lloydsbankinggroup.com.