Press release

Economic research on farm viability and direct payments published

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This was a hypothetical, academic exercise to increase the evidence base on subsidy reform.

The Dutch research institute LEI has today published a Defra-funded academic study of farm viability without direct payments, ‘Farm Viability in the European Union’.

This was a hypothetical, academic exercise to increase the evidence base on subsidy reform. The report, which illustrates an extreme scenario, will be a useful base on which to build more practical work.

The study evaluates the impact that stopping subsidy payments might have made on farms in the period 2004 to 2006. It does not include any of the compensating changes in rents, prices or farm practices that would occur in tandem with a draw-down of direct payments.

At a European level, the study suggests that withdrawing decoupled payments moves only a small minority of European farms from financial viability to non-viability, and very few have immediate cash-flow problems. The UK is one of several countries that the study suggests would be more adversely affected were such a sudden change in payments to ever occur.

The report is available on their website.