The mood in the agriculture sector is pretty glum at the moment, according to Brian Harvey, PKF Francis Clark’s head of agriculture, but, he says: “The mood is worse than the actual financial figures suggest it should be.” Truro-based Harvey hails from Cornish farming stock, so he has a known field of expertise in agriculture. “Actually,” he says, “some of the profits generated this year in the sector are going to be the best we’ve ever seen.” 

The vibes in the industry, however, suggest otherwise. “There’s a general feeling that agriculture isn’t a very loved sector politically any more, and certainly isn’t a special sector for the government,” he says. With changes in inheritance tax planning, NICs, and labour costs and availability, along with the global uncertainty over trade and tariffs that are hitting every sector, some investors are holding back.

“In terms of future confidence in the sector, there should be more because the sector is doing quite well – but there just isn’t,” he says. “A lot of people are sitting on their hands, and also every penny paid in inheritance tax or tax in general won’t be invested back into the business. A lot of people are considering their future and what to do next. By default, there will be consolidation in the sector. There will be exits and opportunities for some but right here, right now, a lot of people have got their finger on the pause button, even some of the larger agribusinesses.”

Speaking to a “very large grower and processor of potatoes with operations across the whole of the UK” who would “normally be spending multiple millions of pounds a year investing in cold stores and machinery and the like”, Harvey says that they have put investment on pause. “And if that’s the case, then that filters right down through the industry, where there’s a real nervousness as to what’s happening next.”

Harvey’s colleague, Nick Tippett, a corporate finance partner at PKF Francis Clark, says that “costs and funding are a big issue for these businesses – rising energy costs have had quite a big impact. The national minimum wage and national insurance changes have put quite a lot of pressure on businesses. The transactions that we’ve seen have often been connected to automation.”

Rodda’s, a large dairy business based in Cornwall, borrowed £4.5m from HSBC in April 2025 for automation of its systems and processes. “That will be a direct result of what’s happening around the labour market,” says Tippett. “And it’s a good opportunity and route for them to scale. Investment around new technology is driving activity.”

Labour issues are not confined to costs, though. Availability is also an issue. The pay on offer and Brexit, as well as the perennial seasonality of work are the drivers of that issue. To an extent, Harvey says, the many headwinds in the UK agriculture sector are currently being mitigated by the farmers’ best friend: the weather. 

“For planting crops, whether that be wheat or vegetables, spring 2025 has been absolutely perfect in terms of weather. The cattle have been out in the fields earlier. The ewes have been lambing earlier. The flowers have been picked in sunshine. Sun on the back does mean everyone feels that bit better,” he says.

But if there’s nobody to harvest the crops, that creates a major problem such that even good growing seasons could generate significant losses, and that’s a point not lost on investors. 

Tech investment high on agenda

“That’s where investment in robotics, AI and technology in general is very high up the agenda, and I think that’s what will probably lead to more consolidation and acquisition because even significant agribusinesses can’t always afford that level of investment with margins being squeezed,” Harvey adds. “You need to be an international or multinational business to be able to make the investment required in certain aspects to replace the labour. The larger agribusinesses tend to be very much squeezed. Their margins can be very small despite turnover of more than £100m. If you’re only making a net profit of 1% or 2% then you can see that those margins are not what they need to be able to reinvest back into the business. And for the most part, these businesses are operating in the field, not the factory, so it doesn’t take much in terms of adverse weather at the wrong time to turn a small profit into a loss.”

Harvey thinks that “a lot of the agribusinesses could be swallowed up by larger businesses to enable them to grow. I think that’s probably the trend at this stage and there’s still a lot of energy and enthusiasm there, and lots of wins in terms of efficiencies and productivity. Ultimately, people want to farm in a sustainable way, by improving and maintaining the soils and maintaining outputs. And if you can master that, then you’ve cracked it. We’ve still got eight billion people across the planet. They need to be fed.”

Protecting supply chains

Many of these farms and businesses on the sale block will be businesses where owners have, as Harvey says, “made the active decision that they didn’t want or need to borrow that at their time in life and better that someone else does it”. The buyers are consolidators rather than ‘new’ farming families. Among those buying will be supermarkets looking to protect their supply chains.

Tippett says: “We saw Morrisons buy a couple of fish-processing businesses recently to secure that supply chain. I suspect that the trend of supply-chain integration will continue because there are certain products where there are relatively few suppliers out there and supermarkets don’t like the threat of being held to ransom by a supplier. 

“We’ve also seen a slight softening of some of the approaches that supermarkets have taken because they are finally waking up to the fact that, actually, if their suppliers don’t supply them, they have nothing on their shelves. And they’ve pinned people down so tightly to the floor that they couldn’t do very much. But if they can bring that in-house, then that mitigates their risk and brings things under their control.”

Phil Sharpe, a corporate finance partner at Price Bailey with extensive experience in the food and agriculture sectors, says: “Supermarkets have been reducing the number of suppliers, which leads to consolidation across the supply chain. Existing large suppliers are becoming more dominant, which is only going to continue as the UK retailers move towards a price war. This will put more pressure on the supply chain to reduce pricing, resulting in smaller businesses finding it more difficult to be sustainable. And it’s going to force more consolidation and even potentially some distress within that supply chain.

“Increases in national insurance and the living wage are driving greater automation to keep employment costs down,” he adds. “Again, that will be partly pushed by the retailers’ pressure on pricing. Automation will provide a competitive advantage while, for some, the lack of it will make them uneconomic in terms of the supply chain.”

Any curbs on immigration are likely to have an impact on the availability of cheap and seasonal labour for agribusinesses. Automated ‘picking and packing’ will happen more and more, but the big challenge of automation, according to Sharpe, “is the capital cost versus the value and the benefit you get out of it. Capital is required to fund automation, which can be difficult when margins are low. So the management needs to consider how much does it want to invest and does it represent best value to the owners. If you’re a small supplier, you probably haven’t got the capital available to automate as much as you want.” This pushes towards consolidation.

With the current confusion over the direction of the global economy, decision-making over external capital investments, like much of the M&A market, is slowing. “It just increases uncertainty,” says Sharpe, “which isn’t good for long-term planning. It also means that when you’re going out and raising capital, greater sensitivities need to be considered to ensure that businesses can continue to meet their capital costs. And that gets funders looking more at worst-case scenarios.” 

Last month UK Prime Minister Keir Starmer announced a ‘reset’ deal between the UK and the EU. The National Farmers’ Union (NFU) said ‘early positives’ of the agreement would reduce barriers for UK farmers to export to the EU. NFU president Tom Bradshaw said: “The government’s ambition to make it easier for the sector to trade with our largest overseas partner is welcome. Of course, as always in trade agreements, the detail is king and we will be scrutinising the specifics of this deal as they become available and as talks continue between the UK government and the EU.” 

Says Sharpe: “Global politics are also affecting cross-border deals. In previous years we saw a lot more US companies acquiring UK businesses. Now it seems the US buyers are looking at how to onshore into America, rather than at facilities overseas. Everybody’s getting more inward-looking, which says that international deals are likely to reduce in the short term, until people are comfortable that things are more balanced again.”

Tariffs and trade deals clearly go hand in hand. “There are trade deals like the recently announced one with the US and there is an element of concern in the UK agricultural sector that we typically adhere to every rule in the book in terms of animal welfare, agrichemicals, high levels of health and safety and the like, looking to ensure that things are done properly,” says Harvey. 

“And there’s a concern that in trade deals, UK agriculture will be somewhat sold down the river. Chlorinated chicken and hormone-fed beef are the common examples that keep getting thrown up of things that are not permitted in this country, but are elsewhere. I suspect that’s because we trade more with the EU and therefore any softening of the rules could damage relations with the EU. This should not be an issue, but there is always that fear. 

“And in terms of investing, all people are really after is a level playing field, but if suddenly there’s a huge amount of product coming from the wider Americas or beyond, where they might have different advantages or do things differently, then that puts a lot of pressure on the sector and the trade relationship with the EU.”

Brits traditionally complain about the weather, but for agriculture Harvey points out we do have a favourable climate: “Everything suggests that the UK should be relatively better positioned to benefit from agriculture than others and therefore there will be inward investment again. Because if you can’t grow it in France or Spain, you simply can’t grow it there. It’s as simple as that.”