SFI update – what we know and where next for farmers?

Defra has shocked the rural sector with its decision to close the window for applications to the Sustainable Farming Incentive (SFI), but what does this mean for farmers moving forward?

The following is a summary of the key details of the announcement along with some thoughts on its far-reaching implications:

• Defra closed the window for applications to SFI 2024 on the evening of 11 March 2025, on the grounds that all of its budget has been allocated.
• Farmers will continue to be paid under the terms of their existing SFI agreement for its duration.
• Any outstanding eligible applications submitted before the window closed will be processed.
• Farmers with an agreement offer need to accept it within 10 working days of it being offered or it may be withdrawn.
• People who had started an SFI application but had not got to the point of submission, will no longer be able to apply, with a limited number of exceptions.
• Defra has announced its intention to introduce a reformed version of the scheme, details of which will be announced in the summer once it knows the outcome of the Spending Review (due to conclude in the first half of June).
• The Government has said the new scheme will be more targeted with the intention being to ‘direct funding to where there is the greatest potential to do more on nature and the least ability [for farmers] to access decent returns from agricultural markets and other forms of investment’.
• Defra officials have indicated that they will consult in some capacity with stakeholders ahead of the announcement about the shape of the ‘reset’ scheme. They want to address questions around the focus of the scheme on nature and outcomes and how it could tie in with the Land Use Framework. They have also said it could potentially support ‘particular groups of customers’, focus more on marginal land and suggested there is unlikely to be free choice of actions in the future.
• When the revamped SFI scheme will open for applications is not yet clear, but it is possible this may not happen until 2026.  
• Options for farmers to replace this loss of funding using other grant schemes are very limited. There may be opportunities for some to secure investment from water companies to grow cover crops. Farms in Protected Landscapes, such as National Parks and other National Landscapes, also currently have access to the Farming in Protected Landscapes (FiPL) scheme, but neither scheme will fill the gap left by the closure of the SFI. The Countryside Stewardship Higher Tier scheme is scheduled to reopen this summer and may be appropriate for those farming businesses who are invited to join it.
• For now, our advice would be to take time to properly plan for a more limited and competitive SFI offering. Even before this announcement, farmers were already facing a challenging year, so budgeting is essential to identify where there may be cash flow issues and to aid decision-making about whether there needs to be more strategic changes to secure your long-term future.

Comment from Jonathan Armitage, Strutt & Parker, Head of Farming & Natural Capital:

The announcement from Defra that the Sustainable Farming Incentive (SFI) scheme is closing with immediate effect has sent a shockwave through the industry. Farmers who were preparing or considering an application have been left in limbo, while those with existing agreements are now deeply concerned. Many have already invested in plans based on the scheme, assuming it offered a level of stability—only to find themselves suddenly without certainty.

Defra Minister Daniel Zeichner explained that the scheme was always operating within a fixed budget and that its closure was inevitable at some point. To many in the industry, this will feel disingenuous when, only weeks ago, Defra Secretary Steve Reed gave no indication of this during his speeches at the NFU Conference and Oxford Farming Conference.

The timing is also unexpected, given that Defra had set a target of 70% farmer uptake—something we were not yet close to achieving—and that most of the old Basic Payment Scheme (BPS) budget had already been removed. Many had assumed that this would allow for continued investment in environmental schemes like the SFI. Instead, the sector is now being told a new approach is on the way, though details remain unclear.

The latest messaging from Defra about a ‘replacement’ for the SFI raises more questions than answers. Ministers have suggested that no one will be excluded, but at the same time, they talk about targeting payments at ‘less productive land,’ where there is ‘the greatest potential to do more for nature’ and where farmers have ‘the least ability to access decent returns from agricultural markets or other sources of investment.’ There is also an emphasis on ensuring funding goes ‘to those who need it most’ and is allocated ‘fairly.’

For many farmers, these statements will be open to interpretation. Does this signal a shift towards smaller farms receiving more support, effectively moving towards an income-based approach? If the goal remains to achieve the best environmental outcomes, then it would seem logical that those delivering the greatest benefits—regardless of their scale—should receive the strongest backing.

There is also uncertainty about what this could mean for farming systems that currently balance food production with environmental benefits. If future policy moves towards a land-sparing approach—where land is either farmed intensively or taken out of production for environmental, energy, or development purposes—it could raise concerns that some of the measures helping commercial farmers reduce their environmental impact while maintaining productivity may be removed or capped.

This could have particular implications for sectors such as grazed livestock and broadacre arable farming on reasonably productive land, where access to future funding may become more limited. Even with the SFI, many of these businesses were already facing difficult decisions about long-term viability due to the loss of BPS and tight margins.

Another key question is how sustainability efforts will be funded in the absence of a clear replacement scheme. Many of the changes towards regenerative farming and environmental stewardship have been driven not just by government incentives, but also by processors, food manufacturers, and retailers. Some of these businesses already provide financial incentives for sustainable practices, often assuming that schemes like the SFI would continue to provide underlying support.

Now, the question is whether the private sector will step up further—or whether farmers will be left shouldering more of the cost of delivering environmental benefits that markets alone don’t currently reward. If businesses do increase their support, it could shift the balance of influence, meaning that future environmental outcomes may be more directly shaped by corporate priorities rather than public funding.

Defra insists this is a temporary pause, with £5bn still allocated to the sector over the next two years. In the context of wider government spending, this remains a significant commitment. Ministers also argue that their broader strategy, including procurement reforms and diversification incentives, will help improve long-term farm profitability. However, there is an understandable sense of caution among farmers, who have heard similar assurances before, often with limited tangible results.

At a time of significant upheaval, the SFI had become one of the few areas of stability for many farmers. Its sudden closure has left the sector once again facing uncertainty, with many now asking what comes next—and how they can plan for the future with confidence. There are no simple answers, other than focusing on what is within your control.