UK rural: prospering from digital connectivity

The Knight Frank Rural Property and Business Update – Our weekly dose of news, views and insight from the world of farming, food and landownership.
Written By:
Mark Topliff, Knight Frank
11 minutes to read

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I wrote last week about how a thriving rural tourism sector not only helps rural Britain also the UK economy. It seems that improvements in rural digital connectivity could also significantly help the country’s economic position giving it an almighty £65 billion boost (see story below). As anyone who lives and works in rural areas knows, the speed of the internet and quality of mobile reception can be woefully poor. While there have been strides in bolstering digital connectivity within rural communities across the UK, a conspicuous digital divide persists between urban and rural landscapes. There’s no doubt that this has stymied the growth potential of countless rural communities and economies, with numerous regions still grappling with the absence of dependable connectivity. Access to reliable high-speed internet enables rural communities to participate in the digital economy. It opens up opportunities for online businesses, e-commerce, and remote work, thereby stimulating economic growth and generating job opportunities. To see the rural economy truly prosper, and take advantage of current and future technology, there needs to be a levelling up of digital infrastructure between rural and urban areas MT

The Rural Update will be taking an August Bank Holiday break, returning on 4 September.

Do get in touch if we can help you navigate through these interesting times. You can sign up to receive this weekly update direct to your email here.

Andrew Shirley, Head of Rural Research; Mark Topliff, Rural Research Associate.

In this week’s update:

• Commodity markets – Bearish wheat markets
• Digital connectivity – Rural improvements could boost UK economy by £65bn
• Green Belt – CRPE calls for expansion of ELM
• Wales – Agriculture Act finally receives Royal Assent
• Scotland – Addressing barriers to tenants’ tree planting
• International news – Could wheat be an ally of the carbon market?
• Clean energy – Funding for rural communities
• Countryside Stewardship – Defra extends application window
• Public footpaths – New guidance on changing rights of way
• A world of opportunity – Farms for sale on four continents
• Country houses – Prices weaken
• Land values – Price growth slows
• The Rural Report – 23/24 edition is out now

Commodity markets

Bearish wheat markets

Apart from wheat, our selection of commodity prices has primarily taken a holiday this past week, with little to no change. For once, geopolitics wasn’t the leading cause of falls in the wheat market. The US Department of Agriculture (USDA) released its forecast of larger-than-expected increases in the maize and soybean crop following some recovery from heat and lack of rain earlier in summer. The impact meant bearish sentiment on the wheat markets despite the USDA also forecasting that global supplies would be down by 4.3 million tonnes because of smaller EU, Canadian and Chinese crops. The unsettled weather across north-western Europe is impacting harvesting as well as quality and yields MT

Talking points

Digital connectivity – Rural improvements could boost UK economy by £65bn

A comprehensive analysis has identified the potential for a remarkable £65 billion surge in the UK economy, all stemming from the enhancement of rural digital connectivity. Dubbed “The Great Rural Revival,” the Virgin O2 report zeroes in on four pivotal sectors that constitute the backbone of the UK’s rural economy: tourism, agriculture, manufacturing, and small businesses, surveying over 1,000 decision-makers. Modelling done as part of the analysis paints a picture of how connectivity enhancements could lead to a substantial 6.8% rise in rural employment, creating 284,000 fresh job opportunities.

Apparently, the East of England stands to reap the most significant gains from digital connectivity advancements. A blend of connectivity could potentially inject a staggering £12 billion into the local economy, generating a cascade of 42,000 new employment prospects.

From cutting-edge applications like drone-aided agriculture and intelligent livestock monitoring to wearable tech innovations and automated booking apps tailored to the hospitality sector, there is huge potential. The report cites that a quarter of surveyed rural business decision-makers conveyed their intention to leverage an array of technologies, ranging from cashless payment systems to video conferencing and online booking platforms, if connectivity receives a much-needed improvement MT

Green Belt – CRPE calls for expansion of ELM

A new report from CPRE, the countryside charity, says that over half of all designated Green Belt land should be covered by Environmental Land Management (ELM) schemes. According to its State of the Green Belt Report 2023, 65.6% of Green Belt is registered as agricultural land and currently, just over a quarter (28%) of all the utilisable farmland is in an agri-environment scheme agreement. The CPRE also recommends that the government should support Green Belt rural communities that wish to use the small ‘rural exception sites’ to develop affordable and social housing. But speculative development proposals that have not been allocated in local plans should not be generally permitted, says the charity.

In another call on the government, it asks for data on building rates for large developments to be publicly and regularly available, believing that this could prevent unnecessary development in the Green Belt - allowing the public to see whether the developers have stuck to their proposals, such as the percentage of affordable housing built. For the upcoming Land Use Framework, the CPRE recommends that planning, farming and forestry policies and programmes need to be integrated if the countryside is to be enhanced and protected. The report just further underlines the conflict of land use currently faced by rural Britain MT

Wales – Agriculture Act finally receives Royal Assent

In a pivotal moment for Welsh agriculture, the inaugural Agriculture Act crafted within the nation’s borders achieved Royal Assent on 17 August, despite vocal opposition and concerns from industry stakeholders. A cornerstone of the Act is the much-debated Sustainable Farming Scheme (SFS), which promises to be the basis of future government support for farmers in Wales. The Welsh government says that the Act sets forth a “comprehensive policy and legal framework designed to empower farmers to produce essential food and agricultural goods while actively combatting climate change.”

However, the journey to the Act’s realisation has not been devoid of controversy. It has faced substantial critique from numerous quarters, with prominent industry leaders raising the alarm over its perceived shortcomings. A recurring point of contention has been the apparent absence of economic viability for family farms within the objectives of the Sustainable Farming Scheme. Critics assert that without a clear commitment to safeguarding the livelihoods of these small-scale agricultural enterprises, the Act’s impact may be limited and unequal MT

Scotland – Addressing barriers to tenants’ tree planting

Several barriers are currently preventing tenant farmers in Scotland from becoming involved in tree planting. The Tenant Farming Commissioner, Bob McIntosh, has called for new approaches to support farmers to plant trees and help Scotland with its net zero journey. In a briefing paper published last week, McIntosh highlights the opportunities for tenant farmers and landlords to work together with the government to remove the barriers. Currently, there is uncertainty over the implications of legislation governing compensation arrangements at the end of the tenancy as well as inconsistency between grant scheme rules and the diversification provisions. Mr McIntosh explains: “The current circumstances mean that tenant farmers are left with no real tree planting incentives, something that, if changed, could have significant benefits in the push for net zero. They need to be able to access current and future support measures and be subject to compensation arrangements which are fair to both landlord and tenant” MT

International news – Could wheat be an ally of the carbon market?

Brazil’s scientists have unveiled wheat’s remarkable ability to capture more carbon from the atmosphere than it releases, potentially positioning the crop as a valuable asset within the burgeoning carbon market. Research conducted by the prominent research organisation Embrapa, in collaboration with the Federal University of Santa Maria, has unearthed a game-changing concept – wheat’s profound capacity for carbon sequestration. The research found that the study’s wheat crop was a net absorber of CO2 (1,850 kilograms per hectare) over the course of a year. In comparison, the soybean crop absorbed nearly as much as it emitted.

The study also highlighted the substantial emissions from fallow land following a harvested wheat or soybean crop. Within just 30 days, this fallow land released 27% of the total carbon accumulated by wheat and soybeans over an 11-month cultivation cycle. To mitigate this, the researchers proposed implementing cover crops or forage crops during fallow periods. A follow-on study will examine how climate and topography intersect with wheat’s ability to sequester carbon, potentially paving the way for the integration of wheat into innovative carbon credit schemes MT

Need to know

Clean energy – Funding for rural communities

This Autumn, the government will open a £10 million fund for rural and local communities to help develop energy projects. Through competitive applications, the Community Energy Fund (CEF) aims to grant fund projects such as rural heat networks, small-scale wind farms, electric charging points and battery storage. The government hopes that funding will “act as a catalyst for attracting private investment to scale up projects further down the line.” It also believes that surplus money generated from the schemes will be invested locally through programmes to protect nature in a local area and educational projects.

The CEF is based on the previous Rural Community Energy Fund and, as such, will be delivered through Local Net Zero Hubs – regional bodies that support local authorities in delivering energy projects. The Department for Energy Security and Net Zero will announce more details before the Autumn MT

Countryside Stewardship – Defra extends application window

Following several technical issues, Defra has confirmed that the 2024 Countryside Stewardship (CS) Mid Tier agreements application window has been extended until 15 September. This is to allow farmers more time to submit their applications online.

CS has been popular in the last year or so, with 32,000 agreements now in place across England. The Rural Payments Agency are also working on further improvements to the online system that includes “greater flexibility over when farmers can apply and how they manage their agreements” MT

Public footpaths – New guidance on changing rights of way

Local authorities are now obliged to take a more practical approach to applications for diverting or extinguishing public footpath routes. Defra has released guidance that gives weight to the adverse impact of a public right of way on a landowner. Reasons that would need to be considered include the need for privacy, safety, and security. However, the circumstances in which these will apply will be fairly limited to routes that pass through the garden or curtilage of a private house, farmyard, or commercial premises. The local authority will consider all options in an application, including whether to divert or replace the rights of way rather than close it. The guidance is effective from 1 August 2023 MT

On the market

A world of opportunity – Farms for sale on four continents

If your agricultural property horizons extend beyond the shores of the UK, my colleagues around the world in the US, Australasia, Africa and Europe can help. The latest edition of The Rural Report includes a mouth-watering melange of international rural properties from natural capital opportunities in New Zealand to commercial arable farms in Zambia, to vineyards in Italy and France. Download the report to take a look AS

Our Latest Property Research

Country houses – Prices weaken

Country house prices came under pressure in the second quarter of the year, as the 'escape to the country' trend reset, and buyers re-calculated their budgets due to higher borrowing costs.

The average price of a property fell 2.6% in the second quarter, according to the Knight Frank Prime Country House Index (PCHI), compiled by my colleague Chris Druce. It was the largest quarterly fall since the global financial crisis in Q2 2008. It follows a decline of 0.5% in Q1.

It left country house prices down 4.2% since their peak in June 2022, although the average property is still worth 15% more than before the pandemic, which supported a surge in prices as people upgraded their homes and took advantage of a period of stamp duty savings.

Download the full report or contact Chris for more information AS

Farmland values – Price growth slows

According to the latest instalment of the Knight Frank Farmland Index, the average value of bare agricultural land in England and Wales rose during the second quarter of the year at the slowest rate since March 2021. Prices increased by just over 1% to £8,845/acre. Annual growth at 8% also slipped into single figures for the first time since the final three months of 2021.

Farmland, however, has outperformed the FTSE 100 equities index, gold, prime central London houses and mainstream house prices over three and 12-month periods. Over five years, only gold has seen stronger capital appreciation.

For more data and insight, please read the full report AS

The Rural Report – 23/24 edition is out now

The Rural Report 23/24 explores the opportunities for businesses, people and this year's theme 'Planet'. With insight and case studies on natural capital, biodiversity net gain and environmental legislation, it's a guide to the ever-changing rural landscape and how Knight Frank's rural teams are supporting their clients make the most of the opportunities on offer.

Whether you are a rural business owner or a commercial business wanting to make the most of your land, read a selection of articles online and download the full report here MT