The Role of Environmental Payments in Sustaining Farm Incomes: A Four Year Study of Farm Businesses in an Upland Area of the UK

A representative sample of both participant and non-participant case study farms was examined over a three-year period in the Shropshire Hills Environmentally Sensitive Area of the UK from 1997 to 2000. The effects on farm business viability were monitored and results compared with two relevant sub samples of Farm Business Survey recorded farms. The study showed that farming profitability declined sharply over the study period but that participant case study farm profitability exceeded that of non-participants by an average of £4024 per year. This was attributable to a combination of factors which included larger average farm size, the ESA premium and more intensive farming operations. Subsidies received by both types of farms were almost totally on the "per head" basis and averaged £270 per hectare. Without these both classes of farms would have been highly unprofitable. The status of the ESA premium compared with these figures was an average of 4.5 percent of business turnover or £2358 per farm, well below that of headage based subsidies. Return on capital invested in land was consistently low, suggesting that even with these levels of subsidies the long-term future of these farms could be uncertain. The results achieved were consistent with those obtained from the Farm Business Survey data provided for the two relevant sub-samples.