Farming News - Record number of farms close following IHT reforms as Budget looms
News
Record number of farms close following IHT reforms as Budget looms
- Since Inheritance Tax Reforms were announced in October 2024, a record 6,270 agriculture businesses have ceased trading
- Net loss of 9,925 agriculture, forestry, and fishing businesses since Q2 2021
The UK's farming industry continues to contract at an alarming rate, with only half of agricultural businesses being replaced by new entrants, according to Cynergy Bank's latest Business Births and Deaths Index.
Between July and September 2025, only 775 new agricultural businesses were established, compared with 1,360 closures, giving the sector a Cynergy Bank Business Health Score* of 0.57, the lowest of any UK industry. In practical terms, for every 10 farms closing, fewer than six are being replaced.
Farm closures have outpaced new openings since Q2 2021, resulting in a net loss of 9,925 farms over that period.
The rate of decline has accelerated sharply since October 2024, when chancellor Rachel Reeves' announced changes to inheritance tax (IHT) relief on family farms.
Between October 2024 and September 2025, a record 6,270 agriculture, forestry, and fishing businesses ceased trading – up from 4,805 the previous year and the highest number since quarterly ONS data collection began in 2017**.
Nick Fahy, CEO of Cynergy Bank, said: "With just half of closing agricultural businesses being replaced, the UK's farming sector is facing unprecedented challenges. Rising costs, labour shortages, and recent changes to inheritance tax relief are driving an alarming rate of closures. This trend not only threatens the livelihoods of farmers but also the sustainability of rural communities and the wider economy."
In the wider UK economy, July to September also saw more new businesses launch (73,450) than close (63,205), resulting in positive Cynergy Bank Health Scores across most industries.
However, business closures are increasingly affecting larger firms. Companies that ceased trading in Q3 employed an average of three people (up from 2.23 three years ago) and recorded the second-highest average turnover since records began (£309,000), just below the Q2 peak of £311,000.
Sector Highlights
- Real Estate: A Cynergy Bank Business Health Score of 1.62, the highest this quarter across all sectors, fuelled by a wave of entrepreneurial property professionals inspired by Netflix shows such as Selling Sunset and Channel 4's Britain's Most Expensive Houses.
- Health and Social Care: A Cynergy Bank Business Health Score of 1.60, likely spurred by continued NHS doctor strikes and increased public sector outsourcing to reduce waiting lists.
- Education: Strong at 1.56, thanks to ongoing government reforms, rising investment and regulatory moves encouraging EdTech and new education businesses.
- Hospitality (1.30) and Retail (1.19): Both sectors showed resilience and growth, weathering the National Insurance hikes introduced earlier this year.
- In contrast, Manufacturing also continues to struggle, with a score of 0.94. Closures have outpaced new openings for more than four years, with the sector steadily shrinking since Q1 2021. In that time, the UK has seen a net loss of manufacturing 9,510 businesses.
* Cynergy Bank's Business Health Score divides the number of business births by the number of business deaths in any given industry to give a snapshot of overall sector health. For example, a score of 1.30 means for every one business going bust 1.3 new businesses are being created. Scores below 1 indicate more businesses are closing than being formed and the industry is in decline.
**Available ONS data goes as far back as 2017: Business demography, quarterly, UK - Office for National Statistics