Defra Spending Review: what you need to do to benefit
NRM
Agriculture
Environment
Many farmers are concerned that Defra’s choice to phase out Direct Payments as we transition away from the EU system will negatively impact their management and business goals. Well, we have some good news: the Defra Spending Review has resulted in the department securing a multi-year funding commitment to reinvest in environmental schemes for the agricultural industry.
Additionally, the Defra Secretary of State, Steve Reed, announced a new Capital Grants offer last week at the Groundswell agricultural event.
What does this mean for you?
The Defra Spending Review 2025: a commitment to farming
This funding involves the following commitments to agriculture:
- More than £2.7 billion a year will be invested in sustainable farming and nature recovery from 2026/27 to 2028/29
- Funds paid to farmers under the Environmental Land Management Schemes will increase by 150% per year (from £800m in 2023/24 to £2 billion by 2028/29)
- An average of £2.3 billion a year will be given to farmers and land managers through the Farming and Countryside Programme
- Additional nature schemes will provide farmers and land managers with up to £400 million a year.
Defra is calling this the “most nature-friendly settlement in history”, and states that all funds will be “directed to support farm profitability, nature recovery and food production”.
Here is an overview of where funds will be allocated over the next few years:
A new Capital Grants offer
The Defra Secretary of State, Steve Reed, announced a new Capital Grants offer last week at the Groundswell agricultural event.
The latest round of funding amounts to £150 million, available for farmers and land managers to help improve how they manage their farmed environment. Environmental improvements include planting hedgerows, managing boundaries, improving water and air quality, restoring habitats, and introducing natural flood management measures.
The grants are designed to help land managers enhance and protect nature and natural resources, and can be used as standalone improvements or to complement existing SFI agreements.
Defra has also modified the grant application process to make access to the benefits fairer, and to ensure that more businesses have the opportunity to receive funding. Farmers can apply at any time during the year, but Defra will only accept one application per calendar year.
The capital grant offer includes 78 items, grouped into six categories. You can apply for items across all groups, although caps do apply to some categories for 2025 applications:
- Air quality (capped at £25k)
- Assessments
- Boundaries, trees and orchards (capped at £35k)
- Natural flood management (capped at £25k)
- Improvements
- Water quality (capped at £25k)
Defra is enforcing caps within some categories to ensure that more farm businesses can benefit from funding, and that the pot can be managed more sustainably.
Later this year, Defra plans to add four further items to the Capital Grants offer: accreditation for educational access visits; installing and maintaining signage; using tree surgery to hedge a tree into a watercourse; and creating or restoring ponds.
Defra will soon release more information on these items. Click here to sign up to the Defra Farming Blog and keep up to speed.
When this funding round is closed, Defra also intends to make further improvements to the offer, and a new funding round will be available for farmers during 2026.
What you need to do following the Defra Spending Review
In March, Defra unexpectedly announced the closure of the Sustainable Farming Incentive (SFI) 2024 scheme. However, this review means that they are going to continue investing in sustainable food production through a variety of Environmental Land Management Schemes, including:
- The SFI
- Countryside Stewardship Higher Tier (CSHT)
- Landscape Recovery
- ELM capital grants
With direct payments being significantly reduced to next to nothing from 2026, if you want to continue receiving payments, you must participate in one of these schemes. We would recommend speaking to your advisor to find out how you can apply for these schemes, if you haven’t already.
How NRM can help
As Steve Reed said at Groundswell, the new SFI scheme will probably launch early 2026. It will most likely involve packages of actions that require analysis results to demonstrate that these actions have been taken.
NRM offers a variety of analytical services, from plant tissue and grain testing to soil organic matter (SOM) and standard soil tests, to help you comply.
Talk to your advisor or contact us directly for more information.
References
https://defrafarming.blog.gov.uk/2025/06/16/spending-review-2025-a-commitment-to-farming/
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