What’s the future of the Sustainable Farming Incentive?

Background

The Sustainable Faming Incentive (“SFI”) is a government scheme which financially rewards farmers who adopt and support sustainable food production whilst also aiming to protect and enhance nature and the environment. SFI launched in 2022 and has provided an additional income stream to farmers in England, partially mitigating the loss of the Basic Payment Scheme entitlement payments that have been phased out over the past few years.

The scheme is the largest land management scheme in the country with some 37,000 active multi-year agreements. Under the scheme, 800,000 hectares of arable land are being farmed without insecticides. A further 280,000 hectares of low-input grassland are sustainably managed and 75,000km of hedgerow are actively maintained to enhance wildlife.

Closure of SFI applications

On 11 March 2025, the Department for Environment, Food, and Rural Affairs (“DEFRA”) unexpectedly announced it had closed the SFI scheme to new applicants with immediate effect.

The Government’s rationale for closing the scheme was that it had set a £1.06 billion cap on SFI in 2024/25 and 2025/26, which has now been reached. David Zeichner (Minister for the Environment, Food and Rural Affairs) stated in the Commons: “I’m afraid basically when the scheme is finished, it is finished.” This suggests that no new funding would be added to the scheme until the new SFI scheme is announced following the Spending Review.

The Government confirmed that other Environmental Land Management schemes such as Countryside Stewardship Higher Tier and Landscape Recovery, will remain in place, and that farmers in existing SFI agreements will continue to be paid under the terms of their agreements.

DEFRA has also assured SFI applicants with outstanding applications that they will still have their application processed, and has published advice on what to do should you receive an offer under the scheme.

The closure came without prior consultation or warning, and to the surprise of farming groups. Mr Zeichner justified the lack of forewarning from DEFRA on the basis that “it can hardly say a week or two before that suddenly it will close, because there will be a spike in applications. It is like a run on a bank.”

The timing of the closure is also surprising as DEFRA had previously stated it was aiming for 70% or higher SFI uptake by farmers and land managers during the agricultural transition period (the post-Brexit period where the Government would move away from historic EU Direct Payments) which will run to the end of 2027. Uptake is still well below this 70% target.

Future of SFI

The Government has stated that “now is the time for a reset”, and that a “new and improved SFI offer” will open for applications in 2026.

There was no news for farmers on the future of SFI in the Chancellor’s Spring Statement on 26 March 2025, but the Government has confirmed that it will provide further information on the future of SFI this summer following the Spending Review.

However, the Government has indicated that, under the new scheme, funding will be more targeted, being directed to where it appears there is the greatest potential to do ‘more on nature’, and where there is the least ability to access decent returns from agricultural markets, or other sources of investment.

The Government has also committed to engaging with stakeholders involved in SFI while it reviews the scheme to ensure transparency. The NFU has announced that it continues to put in significant work lobbying the government on the future agriculture budget and to unlock the SFI budget.