Practical perspectives from across the R&BS team

Each year, we reflect on how changes in interest rates, lending appetite and wider market conditions are affecting farming and rural businesses, and what it means in practice for businesses planning their next steps.

The sector has been through rapid adjustment in recent years. Rising interest rates, volatile costs and policy change have impacted confidence and decision-making, with our 2024and 2025 Farm Finance Outlooks tracking this journey along the way.

For 2026, the picture is more nuanced. There is cautious optimism in some areas, continued pressure in others, and a growing sense that clear planning and early conversations with lenders will matter more than ever.

Interest rates: gradual easing, not a return to the past

The clear view across the team is that interest rates are likely to trend downwards through 2026, but in a controlled and measured way rather than through rapid cuts.

As Graham Sanders notes, “The Bank of England Monetary Policy Committee and most forecasters agree we are nearing a neutral base rate of around 3.25–3.5%, which limits the scope for further cuts. However, with post-budget developments, easing in the bond markets, and reduced government borrowing costs, a rate reduction may come sooner than expected. I wouldn’t be surprised to see the base rate approach 3% in 2026, though any adjustments are still likely to be gradual, given persistent inflation and ongoing global uncertainty.”

Several team members highlighted that, while this easing should improve affordability, it would be a mistake to expect a return to the ultra-low rates of the past decade.

They reinforce an important point: securing the right finance is not simply about finding the cheapest rate. The reality is that competitive finance today requires deeper engagement—understanding lender appetite, choosing the right lender, product and term, and building in headroom rather than relying on future rate cuts to make numbers work. This is where the role of a trusted consultant becomes invaluable.

Land values: stable overall, with growing selectivity

Land values are expected to remain broadly stable through 2026, with variations by region, land quality and buyer motivation.

John Bailey commented: “Despite the changes to Inheritance Tax, we expect little overall change in the supply and demand of agricultural land in 2026. Demand for well-located, quality land is likely to remain strong, but secondary and tertiary land may see softening and downward pressure.”

Well-located blocks, productive arable land and property with diversification potential are performing best.

A theme increasingly echoed across the wider market is the importance of timing and preparation. Whether you’re considering a land purchase, refinancing, or restructuring, those who prepare early by understanding value, addressing issues and having a clear plan are consistently better placed than those reacting at the last minute.

Sustainable farming, policy change and resilience

Environmental considerations and policy change are increasingly shaping decision-making, alongside traditional drivers such as yields and values. As direct support unwinds, businesses are engaging more directly with market signals and rethinking how resilience is built into their operations.

As Jim Richards observes: “Farmers are responding positively to the withdrawal of the support regime and are becoming more responsive to market prices because they have to. Where payment systems historically insulated farmers from price signals, this shift is driving a more dynamic, agile and proactive industry.”

Sustainable farming practices and environmental schemes such as the Sustainable Farming Incentive are increasingly seen as part of long-term resilience rather than a short-term compromise.

While carbon-focused land use continues to attract interest, the key financial takeaway is clarity. Businesses that plan ahead, understand how environmental schemes interact with income streams and land management, and provide clear evidence of both productivity and sustainability are best placed to secure long-term resilience – and reassure lenders.

Farm incomes: pressure remains, but resilience is evident

Farm incomes continue to face pressure from rising costs, policy change and ongoing weather volatility. Most expect margins to remain tight through 2026, even where output prices have improved.

Stewart Hamilton noted that “Livestock prices have started to ease, but only slightly, which may prompt some investment in infrastructure. However, arable incomes are likely to remain depressed this year, alongside pressure in the dairy sector, meaning overall farm incomes are expected to remain subdued.”

Businesses with diversified income streams, tight cost control or a willingness to adapt are continuing to trade through challenging conditions.

Rob Lister adds: “We’re seeing businesses take a more measured approach to capital investment decisions. Those who are moving forward are doing so with tighter budgets and clearer justification, which actually strengthens their position when presenting proposals to lenders.”

From a lending perspective, this places increased emphasis on realistic forecasting, clear explanations and well-presented figures.

Bank appetite: supportive, but more detailed

Bank appetite to lend into the rural sector remains positive, but lending decisions are being made with greater scrutiny, with credit processes being more detailed and less forgiving of uncertainty.

Paul Simon says: “Agriculture has generally been a low-risk sector, with banks showing a good appetite to support it. While this should continue, pressure on margins means a well-presented proposal and business plan are key to a successful application.”

Succession planning, diversification strategies and capital expenditure plans are all areas where lenders are asking more questions. Early engagement and careful structuring are increasingly important in securing competitive terms.

Russell Gambier adds: “Most farmers are closely monitored for performance, cost of production, benchmarking and carbon footprint, for example. This thorough record keeping brings greater understanding and technical improvements which helps build confidence with lenders.”

The complexity of presenting agricultural businesses to lenders is one reason why specialist support matters – you can read Rob Lister’s article for the NACFB on this topic here.

In today’s market, banks want to understand where the business is headed, how risks are being managed, and why the proposal makes commercial sense. Businesses need to articulate their strategy and position themselves as credible borrowers, and that’s where consultancy adds lasting value.

The bigger picture: planning beyond the year ahead

Looking beyond 2026, policy change, environmental obligations, succession planning and labour challenges are all shaping decision-making, more than short-term movements in interest rates.

David West reflects: “Preparation makes all the difference in today’s market. The businesses navigating this period most successfully are those having conversations early rather than waiting until decisions become urgent. That early dialogue creates options and reduces pressure.”

This is the consultancy model R&BS has always provided—working alongside clients to shape strategy, challenge assumptions, and ensure that when financing decisions are needed, the groundwork has already been done.

Moving forward with confidence

While 2026 brings its share of challenges, it also offers opportunities for rural businesses that are well prepared and well advised.

Clear planning, realistic assumptions and early conversations continue to put you in the strongest position — whether that’s refinancing existing borrowing, funding new projects, or simply gaining reassurance that current arrangements remain fit for purpose.

We’re here to help

If you’d like to talk through your plans or review how market conditions may affect your business, we’re always happy to have a conversation.