Constructing a reservoir on irrigable land can add £1,000 per acre to land values, Savills says in its ‘Spotlight on Water’publication, the first study of water sustainability in the rural sector published today.

The research reveals that abstraction reform has led a growing number of farmers to consider constructing a reservoir as they increasingly recognise their merit as an asset that will both amplify the resilience of a business and return on land values.

Analysis of full planning applications and prior notifications since 2013 shows that an increase in government grant support has acted as an important catalyst, resulting in a significant uptick in the number of reservoirs constructed.

The last round of funding under the Countryside Productivity Scheme saw a spike in applications, and the average reservoir construction rate in the two years prior to the pandemic (2018 and 2019) increased by 291% on the preceding five years. Reflecting increased pressure on abstraction licences, the number of applications without grant support remains above average.

By the 2050s, total UK demand for water is projected to have increased by between 2% and 9%, while the amount of available, water is expected to have declined by between 6% and 11%, according to Savills. Flood management, water storage and irrigation are key factors in ensuring that there is neither too much nor too little water available for users at any one time.

Water management grant can pay up to 40% of the costs

This year (2022), a specific Farming Transformation Fund Water Management grant opportunity was opened which offered support for projects that improve farm productivity through more efficient use of water for irrigation and by securing water supplies for crop irrigation. The water management grant can pay up to 40% of the costs for constructing water storage reservoirs, abstraction points, pumps and pipework to fill a reservoir.

Savills research shows that irrigation opens up opportunities to grow higher-value produce such as potatoes and root vegetables, and as a result can see material uplifts in land value (£1,000 per acre), and can also increase rental values between 15% and 25%, depending on the type of land.

Emily Norton, head of rural research at Savills, comments, “In the past, the government has been guilty of leaving water policy behind, despite the threat of both flooding and drought worsening as climate change increases the frequency of severe weather events. But now we are seeing meaningful management of water resources, most recently through its Water Management Grant.

“Not only are the sustainability implications far-reaching, reservoirs can also reduce the vulnerability of businesses to summer droughts, unlock increased yields and provide businesses with the opportunity to introduce new higher-value crops onto farms. We’ve seen how impactful grants have been in the past and how strong the appetite is from businesses. Although capital and revenue returns are improved by reservoir creation, the long payback means that many businesses are not able to consider them and the tenanted sector in particular is excluded from switching to more sustainable water sources. It’s critical that funding for reservoir creation is delivered with adequate timescales to allow collaboration, planning and construction to take place, in order to ensure this commitment to safeguarding one of our most precious resources continues.”  

Due to the scheme’s competitive nature, applications for the Fund Water Management grant are now closed for this year, however, businesses that were unsuccessful or missed the expression of interest window this year, there will be further rounds of the Farming Transformation Fund offered up until 2025/26.