While the headlines were dominated by defence, migration, energy, and housebuilding, one sector was conspicuously absent from the Chancellor’s speech: rural Britain.

For a sector so deeply intertwined with energy, infrastructure, housing development and climate goals, the implications of this review are far from negligible. So, what does the 2025 Spending Review mean for the rural sector?

A mixed bag for rural funding

Before the Spending Review, there was widespread concern that farm and environmental support funding could be cut significantly. Fortunately, those fears did not fully materialise. On the surface, it appears the government has committed to maintaining, if not slightly increasing, investment in rural and environmental priorities. However, when inflation is taken into account, it represents a decrease in real terms. The devil will lie in the detail, which we currently await.

What do we know?

From 2026-27 to 2028-29, over £2.7 billion per year will be invested in sustainable farming and nature recovery. This includes:

• £2.3 billion annually through the Farming and Countryside Programme (a slight dip from £2.4 billion previously)
• Up to £400 million for additional nature recovery schemes

A significant portion of this funding will go towards expanding the Environmental Land Management (ELM) scheme. The ELM budget is set to rise from £800 million in 2023-24 to £2 billion by 2028-29, a substantial increase. This uplift will be partially funded by phasing out legacy subsidy payments. It has been confirmed that for 2026 and 2027 this will include a 98% reduction applied to the first £30,000 of any delinked payment, and a 100% reduction on any amount above £30,000. Thus, the maximum payment available to Basic Payment Scheme (BPS) recipients will be £600 per year.

This is expected to free up around £1.2 billion and the source of the remaining increased funds is unclear, raising questions about long-term sustainability. We suspect some could come from a wind-down of legacy Higher Level Stewardship and Countryside Stewardship agreements, in which case it is not all new environmental funding. A statement from the government further hints to this suggesting future iterations of ELM schemes will be “more targeted to better meet priorities on food, farming and nature”.

Net zero and nature: still on the agenda

The Spending Review reaffirmed the government’s commitment to achieving net zero by 2050 and meeting its legally binding carbon budgets. The inclusion of £400 million for additional nature schemes signals continued support for biodiversity and environmental restoration.

However, the lack of a broader rural narrative in the Chancellor’s speech leaves many wondering how these ambitions will be translated into practical, on-the-ground action. Without clear direction, there’s a risk those delivering environmental restoration and nature recovery may be left to interpret and implement these goals without adequate support.

Infrastructure and housing: rural implications

Capital investment was a clear priority in this review, with major implications for rural land use. A £39 billion allocation has been made for a 10-year affordable homes programme, alongside a £30 billion commitment to nuclear power and £15 billion earmarked for infrastructure – all of which could impact rural land use and landscapes. 

Defra’s capital allocation of £16 billion, including £4.2 billion for flood defences over three years, suggests rural resilience remains a government concern even if not explicitly stated. These investments could bring both opportunities and challenges for rural communities, depending on how they are implemented and whether local voices are included in planning processes.

Sector reactions: cautious optimism

The response from rural stakeholders has been measured. The CLA described the review as “meaningful”, despite the real-term decrease in spending once inflation is considered. Meanwhile, the NFU offered a “cautious welcome,” warning that farmers will be expected to “do more with less”.

This sentiment captures the essence of the Spending Review: while the numbers may appear stable or even positive on the surface, the practical implications for rural communities remain uncertain.

What comes next?

Much hinges on how Defra allocates its budget and how the ELM scheme expansion is funded and implemented. Rural stakeholders will be watching closely for clarity. Until then, the 2025 Spending Review offers a cautiously optimistic outlook for rural Britain: steady funding, ambitious goals, but many unanswered questions.

Further information

Contact Jennifer Hawkes or Andrew Teanby