Hundreds of farm shops are at risk of closure as entrepreneurial land owners face a double blow from Rachel Reeves’s tax raid.
The Farm Retail Association (FRA) said as many as one in two farm shops could be forced to close their doors in the coming years as store owners are “hit from both ends” by the Budget.
Britain currently has around 1,580 farm retailers nationally, according to the latest estimates from Harper Adams from 2022. These stores, which are often owned and operated by farmers, employ 25,000 people.
The FRA’s forecasts suggest more than 700 could close in the coming decades, with the loss of thousands of jobs.
Emma Mosey, the chairman of the FRA and owner of Minskip Farm Shop, said such businesses were being hit by both the tax raid on farmers and on retailers.
She said: “We’re facing the inheritance tax changes, which, as with other farms, will mean essentially selling off 20pc of assets every generation to pay those extra taxes. But we’ve also got the business side as well because we’re employing people in stores and that is going to cost more.”
The British Retail Consortium has estimated the Budget added £7bn to retailers’ costs, by pushing up the minimum wage and raising the rate of employers’ National Insurance, as well as lowering the threshold by which employers have to pay it.
Meanwhile, critics have claimed the Chancellor’s decision to end inheritance tax reliefs for farms worth more than £1m from 2026 will force many farmers out of the industry. Some have already said they will have to split their estates to meet bills as they fall due.
Sean McCann, a chartered financial planner at NFU Mutual, said: “The changes set out in the Budget will present challenges for many rural businesses, whether they are family farms or trading businesses.
“As a result of the £1m cap on agricultural property relief and business property relief combined, many farming families will face substantial tax bills, which could endanger many farm shops.”
He added that many farmers have “diversified to improve profitability, and farm shops are a common way of doing that”.
Ms Mosey said an “eroding” of the farm industry was likely to make it harder for farm shops to source local produce, presenting a challenge to those that do continue to trade.
In some parts of the UK, farm shops face restrictions on what they are able to sell, with requirements for companies to only sell produce from nearby farms. In 2020, Jeremy Clarkson was told he could only sell products in his Diddly Squat store that were from his farm, sourced from within a 16-mile radius or were items the council had specifically allowed.
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A Government spokesman said: “Our commitment to farmers remains steadfast – we have committed £5bn to the farming budget over two years, including more money than ever for sustainable food production, and we are developing a 25-year farming roadmap, focusing on how to make the sector more profitable in the decades to come.
“Our reforms to Agricultural and Business Property Reliefs will mean estates will pay a reduced effective inheritance tax rate of 20pc, rather than standard 40pc, and payments can be spread over 10 years, interest-free. This is a fair and balanced approach, which fixes the public services we all rely on, affecting around 500 estates next year.”
